Be Prepared For Fuel Price Hike!

'OMCs are incurring losses of Rs 1,000 crore per day due to the West Asia crisis.'

The crisis in West Asia has emerged as a "live balance of payments stress test", carrying direct implications for inflation, the current account deficit and the rupee, V Anantha Nageswaran, chief economic advisor in the finance ministry, said on Tuesday.

Petroleum and Natural Gas Minister Hardeep Singh Puri, meanwhile, did not rule out a rise in pump fuel prices, saying State-run oil marketing companies (OMCs) were losing nearly Rs 1,000 crore a day because of the disruption.

West Asia Crisis Impact

Addressing the Confederation of Indian Industry's Annual Business Summit, Nageswaran said: "Managing the current account credibly, financing it, and preventing further currency depreciation are the central macroeconomic imperatives of FY27.

"India's fiscal consolidation path, infrastructure investment, and the reform record of recent years provide the foundation."

Current Account Deficit Pressure

Many economists have sharply revised upwards their estimates for India's current account deficit in FY27, with forecasts now ranging between 1.5 per cent and 2.4 per cent of gross domestic product.

Describing India's exposure to the West Asia crisis as structural rather than temporary, the CEA said the consequences were unlikely to dissipate once tensions ease.

"They are the early-stage consequences of a sustained disruption to one of the world's most critical energy and commodity corridors.

"These structural shifts are not forces operating at a safe analytical distance.

"The West Asia crisis has brought them into simultaneous, light contact with the Indian economy," Nageswaran said.

OMC Losses Mount

Speaking at a separate session, Puri said he was "not saying fuel prices will not go up", while stressing that any decision on price revisions would be unrelated to elections.

"The OMCs are incurring losses of Rs 1,000 crore per day due to the West Asia crisis.

"In the current quarter, OMCs' under-recovery is likely to go up to Rs 2 trillion, while losses might surge to Rs 1 trillion.

"The rate at which we are going, this one quarter of losses may wipe out the entire profits made last year," he said.

India's Energy Buffer

Despite the energy shock triggered by the crisis, India has sufficient reserves, he added, with stocks of crude oil adequate for 60 days, liquefied natural gas (LNG) for 60 days and liquefied petroleum gas (LPG) for 45 days.

As the country faces a shortage of cooking fuel, refineries have increased LPG production to 54,000 tonnes a day from pre-conflict levels of 35,000 tonnes a day.

Fuel Price Hike Warning

Commerce and Industry Minister Piyush Goyal, speaking at another session, said the deteriorating global environment and mounting geopolitical tensions had prompted Prime Minister Narendra Modi to issue a broader call for urgency and action.

"What our prime minister has attempted to do is to guide us that it cannot be business as usual. And India has always performed during the times of adversity," he said.

He also clarified that the prime minister's remarks on curbing foreign travel referred only to leisure travel, not business travel.

"Please go all over the world for your business.

"Spend money to get more money.

"Get more foreign exchange into the country.

"Get investors.

"Get export orders.

"We are planning to take 500 delegations in the next eight or nine months to all parts of the world particularly the FTA countries," he added.

Feature Presentation: Ashish Narsale/Rediff