Petrol, diesel and LPG prices likely to rise as India braces for long period of high oil prices: Taneja

India is preparing for a prolonged period of elevated energy prices and consumers will eventually have to bear a part of the burden as the West Asia conflict continues to disrupt global oil markets, energy expert Narendra Taneja said in an interview with CNBC-TV18.

Taneja said petrol, diesel and LPG prices were likely to rise as oil marketing companies struggle with mounting losses amid elevated crude prices and intense global competition for energy supplies.

“Petrol, diesel and LPG prices are going to go up,” Taneja said, adding that India was “preparing for the long haul” as the impact of the conflict may persist even if hostilities ease in the coming months.

His comments come a day after Prime Minister Narendra Modi appealed for restraint on fuel consumption, overseas travel and gold purchases, while urging citizens to support domestic tourism and reduce dependence on imports.

Speaking at a rally in Hyderabad, Modi said reducing fuel imports had become a national necessity at a time when India imports nearly 90% of its oil requirements. He encouraged citizens in metro cities to adopt car-pooling, use public transport and embrace work-from-home practices similar to those followed during the COVID-19 pandemic.

Government sources told CNBC-TV18 that the sharp rise in oil prices due to the West Asia conflict has emerged as a major risk for India’s current account deficit, and households may have to share the burden of higher energy costs.

Taneja said the government had so far shielded consumers and industries from the full impact of rising oil prices, unlike several neighbouring countries where fuel and fertiliser prices have already surged sharply.

“Now the time has probably come to pass on the burden to consumers — industrial consumers, commercial consumers and also domestic consumers,” he said.

He added that the financial health of oil marketing companies such as Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited must be protected to ensure India can continue securing crude supplies in an increasingly competitive market.

“They are competing with Japan, China and Western European countries for oil supplies. If these companies are not in good financial shape, how are they going to secure oil for the Indian economy and for the Indian consumer?” he said.

R Chandrashekhar, former President of NASSCOM and former Telecom Secretary, said India should treat the current crisis as an opportunity to accelerate reforms and strengthen domestic manufacturing capabilities, especially in electronics and technology.

He said the IT industry had already optimised hybrid work models after the pandemic, limiting the scope for a much larger work-from-home shift at present.

“The industry has, in fact, post-COVID, continued with its hybrid model,” Chandrashekhar said. “The room for further manoeuvre is a little limited.”

However, he said the bigger long-term challenge for India was reducing dependence on imports, particularly in electronics and semiconductor components, which have become one of the country’s largest import categories.

“There is no other choice in the long run but to increase our domestic capability, domestic manufacturing and domestic technologies,” he said.

Chandrashekhar also said the crisis should be used in the same way India used the 1991 balance of payments crisis to push economic reforms and improve competitiveness.

Meanwhile, Ravi Gosain, President of the Indian Association of Tour Operators, said outbound travel demand had already begun slowing because of rising international travel costs, even before the Prime Minister’s appeal to avoid non-essential foreign trips.

According to Gosain, overseas travel costs have risen sharply due to higher fuel prices globally, with airfares up by as much as 50% to 60% compared to last year.

“We are already seeing a 10% to 15% slowdown compared to last year,” Gosain said. “People are also checking whether they can delay their travel.”

He said the Prime Minister’s appeal could further shift demand towards domestic tourism and help reduce foreign exchange outflows.

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Gosain also urged the government to focus on boosting inbound tourism to improve forex inflows at a time when India’s import bill is rising sharply because of elevated crude oil prices.

Apart from fuel conservation and limiting overseas travel, Modi also appealed to citizens to avoid non-essential gold purchases for at least a year and urged farmers to reduce the use of chemical fertilisers and diesel-run irrigation systems.