By S. JHA
As Brent crude retreats sharply from its crisis peak following the US-Iran agreement, analysts say fiscal considerations and welfare spending priorities may outweigh pressure for immediate fuel price cuts in India.
Mumbai, June 17, 2026 — The Brent crude oil is trading at $79 per barrel in Wednesday’s trade. Within two days of the electronic signing of the US-Iran deal, the crude oil price is diving down fast. From the high of $126.6 in April after the US and Israel jointly struck Iran, the current level of crude oil at $79 shows a deep discount. The Narendra Modi-led government observers have begun examining the question: will the prices of petrol and diesel be cut?
The oil marketing companies have been saying that are losing almost ₹700 crores daily for not “enough hike” in the prices of petrol and diesel. A section of economists, even adversarial to the Modi government, have argued that “until the petrol price is raised to ₹130 a litre, the finances of the Centre and the state will be dire straits.”
Taxation on fuels is exorbitant, cumulatively coming at 28 percent. The Centre and the states make a moolah out of the taxes on the fuels. With revenue windfalls, the ruling dispensations run politically rewarding welfare programmes. Political observers claim that the Modi government will pay more attention to supporting the welfare programmes than entertaining the idea of cutting the fuel prices.
Balakrishnan, Co-Founder of Avellon Intelligence, in a post on LinkedIn wrote: “The anticipated reopening of the Strait of Hormuz marks a major de-escalation in the recent energy crisis. While global crude has corrected sharply, Indian consumers should manage expectations.”
His advice: don’t rush to demand a cut in fuel prices. Oil observers note that the Modi government hadn’t cut fuel prices when the crude oil had crashed to an all-time low during the pandemic. The people had even given up in demanding cut in prices of fuels, having sensed that the Modi government is aggressively pursuing welfare policies with finding from fuel tax gains.
“Supply chain lags, inventory rebuilding, domestic pricing mechanisms, and fiscal considerations mean any meaningful relief at the pump will be modest and gradual, likely limited to ₹2-4 per litre over the coming months, if at all. True price relief will take quarters, not weeks,” added Balakrishnan.
But his premise rests on the belief that the Modi government will ask oil marketing companies to adhere to linking retail prices with the prevailing crude oil rates in the international market.
The only solace for the people possibly will be the growing worry in the Modi government that higher fuel prices will drive inflation, which is politically sensitive.
The Deal That Could Reset India’s Energy Future — If It Holds
Follow The Raisina Hills on WhatsApp, Instagram, YouTube, Facebook, and LinkedIn
