Fuel Price Hike Looms As Iran War Disrupts Supply; Experts Call For Urban Policy Reset

If hiked prices of LPG and premium automotive fuels after the US-Israel war on Iran are any indication, an increase in petrol and diesel prices may be in the offing. The forthcoming elections in West Bengal, Kerala, and Tamil Nadu could be acting as a temporary buffer, and Prime Minister Narendra Modi has asked the country to prepare for difficult times. But then, high fuel prices are an opportunity to reset urban policies and cut fossil fuel dependence. The reforms should make it unnecessary or unattractive to use personal vehicles that are indirectly subsidised by expanding free-to-use city roads and flyovers. If car use becomes costlier, it would act as an incentive to shift to buses (to be made free), trains, bicycles, and shared vehicles. These are tested concepts but found little appeal before the Iran war and the energy shock. Consumption of petrol, diesel, and LPG in India has steadily risen, and a normative growth of 6% to 8% in transport fuel demand was forecast for 2026, outpacing China; LPG connections have doubled since 2014, to over 32 crore. Automotive fuel demand is rising, as car ownership is promoted through relaxed taxation policy, while petroleum refining capacity is expanding. The Iran imbroglio has come as a wake-up call. It is turning the conversation again towards alternatives and renewables and the fallacy of pitching for higher economic growth rates without low-cost energy. Change is difficult to achieve because urban policymaking remains heavily centralised, and state governments are unwilling to radically shift to greener policies that prioritise buses, trains, bicycles, and walking. The most common green levies are congestion charging and heavy parking fees on cars, but these are politically demanding. Also, although these are proven solutions in cities, such as Paris, London, Stockholm, and Singapore, they do not find purchase in India.

China’s world-leading policies on electric mobility (and access to resources needed for battery-making) have given EVs a 10% share among all cars in the country in 2025, according to the International Energy Agency. Plug-in hybrids are growing fast too. India needs to focus on mass electric mobility. It made a beginning with the PM e-bus Seva scheme, offering cities 10,000 electric buses, but this is a fraction of the real need. Electric buses and e-three-wheelers need to scale up quickly to cut travel costs and provide decent returns to operators. The costs can easily be met by state governments through civic taxes and urban charges. For cooking fuel, piped natural gas and compressed biogas must be taken up in mission mode. Urban policies need reform. Car users must pay the true cost of personalised travel. Common sense is upended when they get a free pass and buses are blamed for traffic jams. The oil shock is an opportune moment to remove the distortions.