India's energy strategy needs price correction [Op-Ed]

📌 Summary:

• Context: Strait of Hormuz crisis (West Asia tensions, US-Israel campaign vs Iran since Feb 28, 2026) has become a "fault line of the global energy economy"; Brent prices have surged sharply, freight costs and marine insurance premiums at multi-year highs; shipping routes diverted around Cape of Good Hope; LNG disruptions from Qatar

• Core argument: India has so far insulated consumers from the crude price shock through state intervention, supply diversification, and OMC financial absorption — but this strategy is no longer sustainable and a calibrated price correction is needed

• Comparative data on fuel prices: India petrol ~₹95/litre (stable); Germany ~₹220/litre; UK ~₹204/litre; Hong Kong ~₹291/litre; advanced economies saw ~25% average increase

• India''s strategic interventions (last few years): (1) Sourcing basket expanded beyond Gulf — Russia, USA, West Africa, Atlantic basin (2) Strategic Petroleum Reserve strengthened; agreement with UAE to store 30 million barrels in India''s SPR (3) LPG connections expanded from ~14.5 crore (2014) to >33 crore (2026) under Ujjwala Scheme (4) Naval deployments in Gulf of Oman; refineries directed to maximise LPG production (5) Gas allocation prioritised for households, public transport, fertilizer plants; LPG production up ~50% during peak crisis; all 25 fertilizer plants got ~70% of gas requirement

• Pressures on OMCs (causal chain): (1) OMCs selling fuel BELOW market-linked costs to protect consumers from inflation (2) Petroleum Minister Hardeep Singh Puri: under-recoveries could rise sharply at elevated crude prices (3) Estimated daily losses ₹700–800 crore during peak volatility (4) Government already cut excise duties; imposed temporary export restrictions on refined fuels (5) Energy subsidies of this scale strain public finances, weaken OMC balance sheets, distort market signals

• Structural vulnerability: India''s import dependency is structural, not temporary; transport, logistics, aviation, manufacturing, agriculture, fertilizers all heavily depend on imported fossil fuels

• CPI context: India CPI inflation moderate ~3.2–3.5% (Q1 2026) — creates room for calibrated price correction

• Solutions proposed: (1) Gradual pass-through of global energy costs (vs. frequent piecemeal hikes that create uncertainty) (2) Specific recommendation: ONE-TIME hike of at least 13% on petrol, diesel, ATF — government has already cumulatively hiked by ~7%; an additional 13% would eliminate OMC losses (3) Emphasise resilience, diversification and CONSERVATION (PM Modi''s appeals for responsible energy use — reduce travel, encourage remote work) (4) Long-term: shift towards energy transition; reduce structural import dependency

🎯 UPSC Relevance: GS3 (Indian Economy — Energy security; Infrastructure; impact of geopolitics on Indian economy; fiscal management; subsidies); GS2 (IR — West Asia, Strait of Hormuz, India''s diplomatic balancing)

📝 Prelims Facts:

• Strait of Hormuz: chokepoint between Iran and Oman; ~20% of global oil trade
• UAE exited OPEC; India signed agreement to store 30 million barrels of UAE crude in India''s SPR
• Ujjwala Scheme: LPG connections from 14.5 crore (2014) → 33+ crore (2026)
• Daily OMC under-recoveries during peak crisis: ~₹700–800 crore
• India CPI inflation (early 2026): ~3.2–3.5%
• India has so far raised petroleum prices cumulatively by ~7%; op-ed recommends additional 13% hike
• All 25 fertilizer plants in India received ~70% gas requirement during crisis

🔑 Key Term: OMC Under-Recoveries — The notional revenue loss incurred by Oil Marketing Companies (Indian Oil, BPCL, HPCL) when they sell petroleum products below the import-parity/market price. Different from "subsidies" — under-recoveries are absorbed by OMC balance sheets, not the government budget directly, though they ultimately affect dividends and exchequer.