Iran war may force fuel price hike in India as crude crosses $100: RBI Governor warns

RBI Governor Sanjay Malhotra warned that ongoing Middle East tensions could compel India to increase petrol and diesel rates as global crude oil prices climb. He added that the surge in energy costs stemming from the Iran conflict is challenging India’s adaptable inflation framework, possibly prompting action from the Reserve Bank.

The RBI’s upcoming monetary policy review is set for June 5, where it will decide on key interest rates, which have remained unchanged to support growth. The Governor noted that lifting retail fuel prices is merely a question of time should the West Asian turmoil continue, potentially driving up transport expenses and inflation. At its April 2026 session, the Monetary Policy Committee voted unanimously to hold the repo rate steady at 5.25%, preserving a neutral stance.

This approach reflects a ‘wait and watch’ stance aimed at sustaining robust domestic growth while monitoring inflation amid global uncertainties. ‘We are becoming increasingly data‑driven,’ Malhotra remarked at a Swiss National Bank and International Monetary Fund conference in Switzerland on Tuesday. ‘The RBI stays flexible, prepared to overlook temporary shocks, but will act if the pressure becomes persistent.’ He added that excise taxes have been trimmed and state‑run oil firms are currently absorbing the impact of higher global crude prices amid the ongoing Middle East turmoil.

Petroleum Minister Hardeep Singh Puri noted that the nation’s petrol, diesel and LPG inventories are sufficient, yet warned that prices might need to be lifted as public‑sector oil firms accumulate substantial losses. He explained that state‑run oil marketing companies are losing roughly Rs 1,000 crore each day, since fuel rates remain unchanged despite international crude prices spiking past $100 a barrel.

India depends on imports for about 88% of its crude oil needs, so any global price increase sharply lifts production costs for petrol, diesel and LPG. The minister said under‑recoveries have climbed to Rs 1.98 lakh crore, with losses for the current June quarter nearing Rs 1 lakh crore. Puri added that oil companies have boosted LPG output to 55,000‑56,000 tonnes from roughly 35,000 tonnes before to guarantee steady supply, and that India’s crude reserves now cover about 76 days of consumption.

(With inputs from IANS)