India Seeks Lower Oil Prices As High Pump Prices Bite

India is in talks with crude producers about securing more affordable oil prices after tax-laden pump prices of gasoline and gasoil surged to record highs in Asia's third-largest economy, adding to inflation. India, the world's third-biggest oil importer and consumer, ships in over 80% of its oil needs from overseas.

"The government has been taking up the issue, bilaterally with crude oil-producing countries as well as with the Organization of Petroleum Exporting Countries (OPEC) for affordable crude prices for consuming countries like India," junior oil minister Rameswar Teli told lawmakers in a written reply.

India's new oil minister Hardeep Singh Puri recently flagged the issue of high oil prices to Saudi Arabia's oil minister and the chief executive of Abu Dhabi National Oil Co. Oil prices in the global market this month hit their highest level in more than two years as the global economy recovers from the COVID-19 pandemic. However, prices fell on Monday after OPEC and other key producing countries agreed on Sunday to increase oil supply from August to cool prices.

India, the world's third-biggest oil importer and consumer, ships in over 80% of its oil needs from overseas. 

Last year, India raised taxes on sales of gasoil and gasoline, instead of passing on the benefits of lower oil prices to consumers, to boost revenue to fund welfare schemes.

India's federal government collected about 3.35 trillion rupees ($44.90 billion) by way of excise duty from gasoline and gasoil sales in the last fiscal year to March 2021 compared to 1.78 trillion rupees in 2019/20, Teli said.

"The excise duty rates on petrol and diesel have been calibrated to generate resources for infrastructure and other developmental items of expenditure keeping in view the present fiscal position," Teli said.

The impact of the increase in prices of petrol and diesel can be seen in inflationary trends as measured by the Wholesale Price Index, Teli said.

Due to a spike in energy prices, India's wholesale price inflation accelerated to at least a 15-year high of 12.94% year-on-year in May although it eased to 12.07% in June.