Global oil markets have already delivered their verdict. The Strait of Hormuz, one of the world’s most critical energy arteries, has been in strategic confrontation.

The escalation involving President Trump and Iran has pushed crude prices past the 100-dollar threshold, reintroducing a level of volatility that the global economy has not confronted in recent years. For India, which depends heavily on this corridor for energy imports, the implications are immediate and material.

Yet, domestic fuel prices remain conspicuously stable. This reflects a conscious policy choice to defer the transmission of global price shocks, particularly in the run-up to politically sensitive state elections.

Policy choices and fiscal pressure

State-run oil marketing companies are absorbing substantial under-recoveries, estimated at approximately Rs 18 per litre on petrol and Rs 35 per litre on diesel. It is only a matter of time before these losses are curtailed and the pricing realigns with market realities.

The policy arithmetic is unforgiving. India faces a constrained set of choices. It can pass on higher global prices and risk reigniting inflation. It can continue absorbing losses through public sector balance sheets and weaken institutional financial health. Or it can reduce taxes further and widen the fiscal deficit. None of these choices is without consequence.

Recent actions suggest a calibrated attempt to balance these trade-offs. Excise duty reductions and export adjustments have provided partial relief, cushioning consumers while distributing the burden across the fiscal system.

This approach reflects prudence but does not eliminate the underlying pressure. A post-election price correction is, therefore, not merely........

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