Modi Government Shields India From Global Energy Inflation
Energy prices are on the rise in the developed world. It’s like a bloodbath at fuel stations in Europe right now. It was the same for the United States until recently. Oil markets in the proverbial ‘West’ were turned upside down when sanctions meant to punish Russia went awry.
Gasoline cost over $5 per gallon in June. Usually, gasoline is relatively expensive in India because there are separate state and central taxes. Oil prices in the country should have risen to record heights during abnormal times like the ones we have experienced in recent months.
Quite the contrary was true. Even though gasoline prices skyrocketed in the previous months worldwide and Sri Lanka fell into a full-fledged crisis, Indians paid little more than usual for gas. The achievement of India was unique in the world.
In this case, fuel prices froze without ruining the country’s oil companies or economy. Gasoline prices in most developed countries rose by almost 40% from July 2021 to August 2022.
Gasoline prices rose exponentially this year across the wealthiest nations, which could not keep them in check. As for India, fuel prices remained stable. As part of this effort, a price freeze was imposed and consumed discounted Russian fuel.
Earlier this year, state-owned fuel retailers, such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL), absorbed the global crude price increase, incurring tremendous losses but refusing to pass on inflated prices to consumers.
Diesel and gasoline lost Rs 20–25 per liter as oil prices rose internationally. On April 7 this year, an oil price freeze was instituted, leading to oil companies incurring losses to compensate for the global price hikes without transferring the costs to Indian consumers.
Why has petroleum not become cheaper in India after global oil prices have fallen again? Free lunches don’t exist in a mature economy like ours, especially with a government that doesn’t believe in them.
In recent months, the Modi government paved the way for oil retailers to stop raising oil prices. Ultimately, they complied, and the Indian consumer was virtually unaffected. No matter what, these oil companies compensate for their significant losses today.
Indians were effectively insulated from the significant increase in oil prices as the government foresaw that global prices would eventually decline, allowing state-owned oil companies to cover their losses.
While state refiners are making up the losses from earlier this year without drastically raising fuel prices, the losses from earlier this year have not been eliminated.
During the global oil price rally, Indian consumers were almost magically protected by the Government of India that opted for realpolitik instead of supremacist lectures laced with duplicitous morality from the West.
No doubt, war is terrible and causes misery throughout the world. Can India gain the ‘democratic world’ approval if it sacrifices its strategic interests? No, not at all. An independent foreign policy is practised by India, which is its own master.
It took India’s confidence in its foreign policy to be able to stand up to the West and resist being bogged down by its interests. Russia’s oil imports increased 15.5% this year, while those from Iraq and Saudi Arabia dropped 11.5% and 13.50%, respectively, lowering the Middle Eastern oil share to 56.5% from 59.3%.
While supplies from Saudi Arabia rebounded for the first time in five months, crude oil imports from Russia dropped in July along with India’s overall purchases for the first time since March.
The third largest oil supplier to India is still Moscow. Regarding oil sales to India, Iraq is forced to match Russian discounts. Amid talks to establish oil price caps globally, Russia has offered several discounts to India to ensure it maintains its position as a major oil supplier.
Similarly, India will make its decision in a measured manner. After Iran and Venezuelan oil are allowed to be sold globally, New Delhi may be inclined to join the price cap group.
Compared to the average oil import price, Russian crude oil was $6 less per barrel in August. The cost of Iraqi oil has been $9 per barrel less than Russian oil over the last two months. World oil exporters are competing to hold onto their dominance in the Indian market, which has helped keep energy prices low.
In the opinion of External Affairs Minister S Jaishankar, India’s policy is relatively straightforward. India does not purchase ‘Russian crude’ from the markets. In its quest for ‘cheapest’ oil this year, it has looked for Russian crude for some time.
New Delhi once more turned to the Middle East after Iraq offered better discounts. Indian crude will be sourced from Moscow even if Russian oil becomes cheaper. Due to significant discounts, state-owned oil refiners have minimized losses during turbulent times.
In decoupling Russia for the war on Ukraine, India would sacrifice its interests on an altar of Western-exported morality, which is inherently hypocritical. In India, astute governance is protecting consumers from global energy inflation through intelligent control.
India should clamour when oil prices rise. Energy prices are too high for a developing nation. They have an unprecedented impact on the country’s most extensive consumer base. Appreciating the nation’s leadership is also essential in preventing global energy inflation.
As a reminder that national interests must always prevail, India has accomplished nothing short of magic in the past few months. If a country of our size and scale does not get bogged down, the world will fall in line. Over the past few months, India has done an excellent job of being consistent and expressing its views honestly.
Edited by Prakriti Arora