New Delhi₹3-per-litre hike raised Delhi petrol to ₹97.77.
India imports the majority of its crude through Hormuz, closed since February, sustaining a rising import bill passed directly to consumers.
Prime Minister Modi called for voluntary fuel conservation; opposition parties demand excise-duty cuts instead.
Sources: The Hindu, India News
THE IMPORT DEPENDENCE
India imports roughly 85% of its crude oil, the highest dependence of any major economy. There is no domestic cushion — every dollar move in Brent flows through to the pump within weeks.
THE HORMUZ ROUTE
The majority of India's crude comes from Gulf suppliers — Iraq, Saudi Arabia, UAE — and transits the Strait of Hormuz. Russia became the largest single supplier after 2022, but those barrels arrive via the Suez-Bab el-Mandeb route, which has its own chokepoint risks.
WHY FUEL IS THE PERFECT TAX
Fuel demand is inelastic — people buy roughly the same amount regardless of price. Governments worldwide exploit this: fuel taxes are cheap to collect (a handful of refineries vs. millions of income earners) and nearly impossible to evade. India's fuel excise generated ₹3.2 trillion in FY2024, roughly 12% of central tax revenue.
THE HIDDEN STRUCTURE
India deliberately kept petrol and diesel outside the GST (goods and services tax) system. This lets the centre and states stack taxes independently — central excise plus state VAT. At peak in 2020, taxes comprised 65% of petrol's retail price. No other major economy taxes fuel this aggressively relative to base cost.
THE PASS-THROUGH MECHANISM
State-owned oil marketing companies (Indian Oil, BPCL, HPCL) set retail prices daily based on a 15-day rolling average of import costs plus the rupee-dollar rate. When the rupee weakens against the dollar while crude rises, the squeeze compounds — both sides of the import bill move against the consumer.
THE 1973 PRECEDENT
The first OPEC oil shock quadrupled crude prices and pushed India's import bill from 10% to 40% of export earnings within a year. Indira Gandhi's government responded with petrol rationing, Sunday driving bans, and the nationalization of foreign oil companies — the foundation of today's state-owned OMC system.