To what extent is the Ukraine crisis responsible for fuel price rise in India?

Fuel prices -- from petrol and diesel to CNG and LPG prices in India -- have been on fire in India. But to what extent is this because of the ongoing crisis in Ukraine due to the Russian invasion? Or are other factors at play here? Experts are divided.

Vice President and Head of Research at ShareIndia, Ravi Singh told Business Today, “Russia is one of the top three suppliers of fuels – oil and gas. India buys about $1 billion of oil from Russia, though its oil import bill is over $82 billion (for 2021)- a 108 per cent rise from 2020 and imports a major chunk of its natural gas from Qatar.” 

He also noted that crisis between the two countries has led to shortage of gas supply, leading to a rise in gas prices. Dr Singh further underscored, “The supply disruptions and sanctions on Russia have created a major hike in the global energy prices. India is dependent on international energy supply and international prices impact Indian consumers.” 

GCL Securities Vice Chairman Ravi Singhal is of the opinion that the sanctions on Russia are not the only reason behind the rise in gas prices in India. He said there are six main factors that the rise in gas prices in India can be attributed to —ban on Russia after Ukraine invasion, crude supply from US reserves and other countries, lockdown in China, OPEC not seemingly increasing output and the US not increasing its crude output.  

Singhal also noted that the government needs to bring down taxes on fuel or come up with alternative plans. He mentioned, “For the gas prices to come under control, the government can think to reduce some taxes or come up with some specific plans as it is very important to reduce the fuel prices else inflation can burst.” 

As people spend more on petrol and diesel, they have a tendency to spend less on other goods and services of need. Demand for goods plummets with the curb in spending and it also impacts businesses like import activities, manufacturing and construction.  

Government's view

However,  the government view is that although fuel prices are rising, yet this rise is not that much when compared with other countries. Union Minister for Petroleum and Natural Gas Hardeep Singh Puri, in fact, recently told the parliament that the rise in petrol, diesel and gas prices in India is very less compared to the price rise in these commodities globally. He also noted that this disruption in fuel supply is due to the ongoing crisis in Ukraine. 

Puri said in the Lok Sabha, “On February 24 when the military action took place, suddenly they (global oil prices) shot up to $92, then up to $124 and went up to $130. Are we the only country affected by this?” 

He had also noted that the fuel price hike in India is actually 1/10th when compared to the rise petrol and diesel rates in other countries. 

“Fuel prices hiked in India are 1/10th of prices hiked in other countries. Comparing gasoline (petrol) prices between April 2021 and March 2022, the prices in the USA have increased by 51 per cent, Canada by 52 per cent, Germany by 55 per cent, the UK by 55 per cent, France by 50 per cent, Spain 58 per cent but in India only 5 per cent,” Puri said. 

Minister of State for Petroleum and Natural Gas Rameswar Teli also told the Rajya Sabha that the government has consistently taken up the issue of high crude prices with the Organisation of Petroleum Exporting Countries (OPEC) and requested them to increase their production of crude oil.  

Latest petrol, diesel, CNG and LPG prices 

Petrol and diesel prices have been on a rise for 16 days since March 22 after remaining constant for almost four months since November 5 last year. 

Fuel rates were, however, kept constant today after rising 14 times for 16 days. Due to this increase, petrol and diesel cost Rs 105.41 per litre and Rs 96.67 per litre in Delhi, respectively. Petrol and diesel prices stood at Rs 120.51 per litre and Rs 104.77 per litre in Mumbai after this hike.  

CNG prices have spiked by Rs 9.10 per kg in the past six days whereas LPG cylinder rates, on the other hand, were last revised on April. After the revision, CNG will now cost Rs 69.11 per kg in the national capital and Rs 71.67 per kg in Noida, Greater Noida and Ghaziabad from today. 

Rates of 19-kg commercial cylinders were hiked by Rs 250 from April 1. After this hike, 19-kg commercial cylinders cost Rs 2,253 in Delhi, Rs 2,205 in Mumbai, Rs 2,351 in Kolkata and Rs 2,406 in Chennai.