Reserve Bank of India Governor Sanjay Malhotra said Wednesday that India may increase petrol and diesel prices if the West Asia crisis persists [1].
This potential shift threatens to increase transportation costs and fuel inflation across the country. Because India imports a significant portion of its crude oil, sustained price hikes in the Middle East put immense pressure on the national economy and government subsidies.
Speaking during a conference in Switzerland on May 13, Malhotra said, "If crude oil stays above $100 per barrel, we may have to see a price hike in fuel" [1]. He said participants at the conference that petrol and diesel prices may rise if the Middle East crisis keeps crude oil costs elevated [2].
While the Indian government has not increased retail pump rates despite the rise in oil prices following the conflict in West Asia [3], the financial burden on oil marketing companies is growing. Reports indicate that oil companies are losing roughly Rs 20 per litre on petrol, and Rs 100 per litre on diesel [4].
Market analysts suggest that if crude prices remain above the $100 threshold, retail prices for petrol and diesel could increase by about ₹20 per litre within three to six months [5]. This volatility has already affected other energy sectors; India recently raised LPG prices for the first time in almost a year [6].
Malhotra's warning highlights the tension between maintaining affordable fuel for citizens and ensuring the financial viability of the companies that distribute it. The government has previously absorbed these costs to prevent inflation, but a prolonged crisis may make that strategy unsustainable.
“"If crude oil stays above $100 per barrel, we may have to see a price hike in fuel,"”
The RBI Governor's warning signals a potential shift in India's fiscal approach to energy. By linking retail prices to the $100 per barrel threshold, the central bank is acknowledging that the government's ability to subsidize fuel is reaching its limit. If the West Asia conflict continues to disrupt supply and inflate prices, the resulting retail hike will likely trigger a ripple effect of inflation across food and logistics sectors.
