India’s petrol prices rank among the world’s cheapest, and Oil Minister Hardeep Singh Puri recently spelled out exactly how the country maintains this affordability despite global crude oil costs being high. The explanation reveals a deliberate strategy built on multiple pillars that work together to keep fuel accessible for ordinary Indians.
India’s first advantage is domestic refining capacity. Over the last decade, the country has invested heavily in building new oil refineries and upgrading existing ones. This means India can process crude oil more efficiently than many other nations, reducing the gap between global crude prices and what people pay at the pump. The more oil a country can refine domestically, the less it depends on imported refined fuel and the more control it has over final prices.
Second, India negotiates directly with crude oil producers for favorable long-term contracts. Instead of buying oil at volatile global market rates every day, the country has agreements with major oil-producing nations like Saudi Arabia, Iraq, and Russia that lock in lower prices over months or years. These contracts protect India from sudden price spikes that would immediately raise pump prices.
Third, India maintains strategic petroleum reserves, large underground storage tanks filled with crude oil purchased during periods when global prices were low. When international oil prices spike, the government can release oil from these reserves instead of buying expensive crude on the open market, directly limiting price increases that would otherwise reach consumers.
Fourth, India’s tax structure on fuel is comparatively low. While petrol and diesel carry taxes in India, the total tax burden is significantly lower than in Western countries like the United States, UK, or European nations. In those countries, fuel taxes can double or triple the pump price, which is why Indians see cheaper petrol than most developed nations.
Why this matters is straightforward: millions of Indians depend on affordable fuel for their livelihoods. Truck drivers, auto-rickshaw operators, and ordinary car owners benefit directly when pump prices stay low. In a country where transportation is often essential for earning income, expensive fuel directly cuts into the earnings of working people.
However, keeping prices artificially low carries costs. Governments earn less tax revenue that could fund roads and public transit. Oil companies earn lower profit margins, limiting investment in new projects. The strategy works as long as crude oil remains reasonably priced globally, but sustained high crude costs would eventually force difficult choices.
Puri’s explanation demonstrates that India’s cheap fuel is not accidental but the result of conscious policy decisions about refining, negotiations, reserves, and taxes. For now, Indians continue to pump some of the world’s most affordable fuel.
