India raises petrol, diesel prices for first time in four years amid oil shock

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New Delhi: In an effort to ease the strain on state-run oil traders affected by escalating global crude costs, the Indian government raised the price of petrol and diesel by 3 rupees per litre on Friday, the country's first fuel price increase in four years.

The spike follows the interruption and closing of the Strait of Hormuz amid the crisis sparked by U.S.-Israeli assaults on Iran, which caused global oil prices to soar beyond $120 per barrel. Later, prices dropped to between $100 and $105 per barrel.

Diesel prices in Delhi increased 3.4% to 90.67 rupees per litre, while petrol prices increased 3.2% to 97.77 rupees per litre.

Despite ongoing instability in the global energy markets, India has so far refrained from boosting retail fuel prices, making it one of the last big economies to do so.

According to Madhavi Arora, chief economist at Mumbai-based Emkay Financial Services, the initial impact on consumer inflation would probably be low at about 15 basis points. However, increased transportation and logistics expenses could lead to more extensive inflationary pressure.

India's fuel market is dominated by the three state-owned fuel retailers, Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation, which typically revise prices collectively.

Prime Minister Narendra Modi warned earlier this week that India's foreign exchange reserves were being strained by rising energy costs and advised individuals and companies to preserve fuel by taking steps like working from home, limiting off travel, and lowering imports.

 State-run retailers faced allegations by opposition parties and experts of holding fuel price changes until after the recent state elections, which ended last month with Modi's BJP winning two of four states.

 Fuel dealers were losing over 100 rupees per litre on diesel sales and roughly 20 rupees per litre on petrol, according to oil ministry official Sujata Sharma in April.

 Nayara Energy, a private refiner supported by Russia, had previously increased retail fuel prices in March in an attempt to counteract growing losses.