The key question now is whether petrol, diesel and fertiliser prices in India could increase in the coming months as geopolitical tensions continue to threaten global energy supplies and trade.
Indian oil marketing companies (OMCs) import most of the crude oil they process. The sharp rise in international prices is therefore increasing their under-recoveries and losses. With the government having already provided relief through excise duty cuts, its scope to offer further assistance to state-run oil companies has become considerably limited on the fiscal front. The government is also facing the existing burden of expenditure on fuel and fertiliser subsidies.
The impact of tensions in West Asia is also being felt across logistics and shipping networks. Risks to the safety of ships and their crews have increased significantly along major trade routes, particularly the Strait of Hormuz.
According to the Federation of Indian Export Organisations (FIEO), container shipping rates to ports in West Asia have surged from 0 to between ,000 and ,000. The Drewry World Container Index showed that freight charges for a 40-foot container had reached ,585 on October 22, compared with ,746 a year earlier.
The sharp increase in freight costs has raised concerns that imported goods could become more expensive in India, adding to the economic pressure created by higher energy prices.
Will Petrol, Diesel and Fertiliser Prices Rise in India?
According to a report by The Times of India, there is some relief on the fertiliser front, as the immediate risk of a price increase in India appears limited.
Senior government officials said fertiliser companies had purchased sufficient stocks for the next season while prices were still relatively low. This advance procurement is expected to help protect domestic supplies from the immediate impact of rising international prices.
However, if the crisis involving Gulf countries continues for an extended period, the risk of higher costs could increase. The duration of the disruption will be a key factor in determining how significantly global price movements affect domestic markets.
Rising crude oil prices are already putting direct pressure on India's import bill, trade deficit and the rupee's exchange rate. Higher international energy prices could further complicate the government's efforts to manage these economic pressures.
Despite these challenges, the government appears to be in a relatively stable position on the fiscal front. Disinvestment proceeds exceeding budget estimates, a substantial dividend received from the Reserve Bank of India (RBI), and sustained tax collections have provided significant support to government finances.
The Centre remains confident that the fiscal deficit for the current financial year will stay within the target of 4.3% of GDP.
While advance fertiliser procurement offers some protection against an immediate price increase, the outlook for fuel and fertiliser costs will depend on how long tensions in West Asia persist and how global oil prices, shipping expenses and India's fiscal position evolve.
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