India was forced to roll back a huge hike in jet-fuel prices for local flights within hours of pushing them to a record, bringing fresh upheaval to an industry grappling with the effects of a deepening war in the Middle East.
State-owned Indian Oil Corp. — which leads pricing moves — initially doubled the price in New Delhi to 207,341 rupees ($2,187) a kiloliter for April. Hours later, it revised them to 104,927 rupees, according to its website.
The cost for “domestic markets was expected to increase by more than 100% on 1 April,” the oil ministry said in a statement on X, citing factors including the closure of the Strait of Hormuz. However, state fuel retailers have passed only a partial and staggered increase, it added.
Carriers flying overseas “will pay for the full increase in aviation turbine fuel prices, consistent with what they pay in other parts of the world,” according to the statement.
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US and Israel’s strikes on Iran have thrown the global energy market into turmoil, with the near-total closure of the key waterway choking off exports. Crude oil has surged on the widening disruption, while product prices — including jet fuel — have rallied even more.
India — the world’s third-largest oil user and a major buyer of gas — has been hit particularly hard by the crisis. A deepening energy crunch has hurt businesses and consumers, with an acute shortage of cooking gas that is ruppling through the economy. The rupee has collapsed to a record low against the US dollar.
The jump in jet fuel — had it been implemented in full — would have been a heavy burden for local airlines, which are already grappling with thin margins, and domestic passengers.
India’s airlines had been anticipating a steep hike and asked the aviation ministry to ensure fuel retailers do not pass on the full additional cost to carriers, according to people familiar with the matter, who asked not to be named as talks were private. Had the hike come through, airlines would have been forced to reduce capacity on smaller routes so as to cope, they said.
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Domestic routes account for a significant share of the total aviation market in India, according to Mark Martin, chief executive officer of Martin Consultancy, which specializes in aviation. “Doubling jet fuel prices would have severely impacted the domestic market. A nominal increase helps sustain the momentum.”
In usual times, India typically exports nearly half of the aviation fuel it produces. However, Prime Minister Narendra Modi’s government last month imposed export taxes on the fuel to boost local stockpiles.
Airlines across Asia and beyond have been impacted by the month-long war. Carriers from Vietnam to New Zealand are among those that have begun canceling flights as costs soared.
The Indian government’s “timely intervention will go a long way in helping carriers navigate one of the most challenging global crises in recent times” Ajay Singh, chairman of budget-carrier SpiceJet said in a statement.
Efforts to shield consumers from steep airfares will come at a cost for fuel retailers. They are already losing 24.4 rupees per litre on gasoline and 105 rupees on every liter of diesel sold, according to the oil ministry.