Money spent on petrol and diesel if a significant part of day to day expenses for common people as well as industries in India. This is why global headwinds such as the Russia-Ukraine war and supply cuts by Saudi Arabia can have an impact on household budgets and India's economic growth.
As the country has been awaiting fuel price cuts last seen in May 2022, there's no respite in sight with OPEC as well as Russia slashing supply abruptly.
How did India get to this point?
India had to raise fuel prices drastically right after the UP elections, since it waited for 4.5 months even as global crude prices went up.
Even though three state-owned oil firms were hit by a record Rs 18,000 crore loss in the first quarter of FY23, discounted oil from Russia and Iraq helped India contain inflation.
In May 2022, India had cut excise duty, which enabled it to reduce fuel prices, which was the last relaxation.
Since then India has approved a Rs 22,000 crore compensation for oil PSUs, which has only allowed them to break even.
This is why India hasn't been able to slash prices despite getting discounted oil from Russia, which is hit by sanctions globally.
What lies ahead?
This year, there was some hope of a price revision since prices were softening for the crude oil basket that India gets its supply from.
But these hopes have been dashed by the surprise supply cuts by Saudi and GCC-dominated OPEC, as well as Russia.
With Chinese oil demand expected to grow and the supply restricted further, global crude oil prices will surge leaving no room for India to make petrol and diesel cheap anytime soon.
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