Policy missteps: On the government’s handling of India’s fuel crisis

The events unfolding in West Asia have shone a spotlight not only on India’s energy security, but also on its policy preparedness and communication strategy in times of crisis. With India importing close to 90% of its oil needs, it is natural that any disruption to supply chains would hit it hard. The Strait of Hormuz is particularly vital in the supply chain. To the government’s credit, it has been gradually trying to reduce India’s oil import dependence. The push for ethanol and biofuels is a step in this direction. Smoothening their adoption should continue to be a policy priority in the near term. That said, India’s dependence on imported oil remains vast and growing, with the economy expanding by 6%-8% every year. Therefore, measures such as ethanol or biofuel-blending are only likely to be of marginal strategic significance. The policies on importing oil need to become more long-term oriented and robust in the face of external pressure. The crisis in West Asia has shown India just how important supplies from Russia are, at a time when New Delhi had been cutting Russian oil imports due to American pressure. In the past, the government had given in to U.S. pressure over Iranian and Venezuelan oil. The U.S. is now encouraging India to import Russian oil again to steady global markets. The U.S.’s 50% tariffs were hard to bear, but India knew that the U.S. Supreme Court was deliberating on the issue, and, so, could have waited a month for its order. As things stand, India may no longer receive a discount for Russian oil, it has squandered Moscow’s trust, respect from the U.S. is diminishing, and a trade deal with it remains distant.

Government officials have made anonymous statements saying that fuel prices will not be hiked in response to higher oil prices. This is as much a political necessity as a moral one. After all, fuel prices were not cut over the last two and a half years even when oil prices were comfortably low. The Pradhan Mantri Ujjwala Yojana (PMUY), providing LPG connections to households, has also laid bare how policy does not anticipate crises. Households have benefited from the PMUY, but the resultant increase in LPG demand — without a commensurate increase in stable supplies and reserves — has meant that restaurants and hotels are now suffering amid shortages. Finally, the policy of the government to so far communicate only through off-record briefings and occasional tweets has meant panic over fuel availability has spread faster than warranted. Tuesday’s inter-ministerial press conference came days late and no questions were taken. Clear, accountable communication was needed, yet missing. The government’s crisis communication needs more work.