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Coal, oil and gas

The fossil fuels India runs on, where they come from, and what they cost.

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The oil shock and fuel pricing

Prelims and Mains

LeadThe oil shock of 2026: who pays for dearer crudeJune 2026

Why in news

Through June 2026 the government used taxes, export duties and budget support to manage the rise in crude oil prices caused by the conflict in West Asia. It set up a ₹10,000 crore fund to steady the price of aviation fuel, raised export duties on diesel, and waived excise on petrol with a higher ethanol blend.

Background

India imports over 85 per cent of its crude oil. About two fifths of it normally comes through the Strait of Hormuz.
So a conflict in the Gulf hits India three ways at once: prices, the rupee and the Budget.
Petrol and diesel prices are in principle set by the market, but the three public sector oil companies hold them steady when crude swings.

Who can bear the cost

The consumer, through higher pump and cylinder prices. This feeds inflation.
The oil companies, by selling below cost. This erodes their capacity to invest.
The Centre, by cutting excise duty or paying a subsidy. This widens the fiscal deficit.
The States, which also tax fuel.
Every choice in June was a choice among these four.

The tools used

Export duty on diesel and aviation fuel, reviewed every fortnight, to keep fuel at home and tax the refiner's windfall.

Budget support for aviation fuel, given as an interest free advance to the oil companies.
A higher cylinder price, with the Ujjwala subsidy protecting poor households.
Ethanol: excise waived on blends above 20 per cent.
Other suppliers: Russia remained India's largest source of crude.

What the shock shows

Import dependence is the root; it has risen, not fallen.
Energy security and foreign policy are tied: the largest supplier was one under Western sanctions.
Fuel is outside the Goods and Services Tax, so the Centre and the States tax it separately and heavily.
Natural gas was rationed too, with households protected and industry cut, until supplies recovered in July.

The way forward

Fill and enlarge the strategic petroleum reserves.
Diversify suppliers and routes; ports outside the Strait, such as those of Oman, matter.
Cut demand: electric mobility, ethanol and gas.
A price stabilisation fund, built in good years, to smooth prices without ad hoc tax changes.

Prelims facts

India imports over 85 per cent of its crude.
The Strait of Hormuz lies between Iran and Oman and joins the Persian Gulf to the Gulf of Oman.
Petrol, diesel, crude, natural gas and aviation fuel are outside the Goods and Services Tax for now.
India's strategic reserves are at Visakhapatnam, Mangaluru and Padur.
The Ujjwala scheme gives free cooking gas connections to women of poor households.

Open the lead on its own page

India imports over 85 per cent of its crude oil. About two fifths of it normally comes through the Strait of Hormuz.

What changed

16 Jun 2026LeadThe oil shock of 2026: who pays for dearer crude

Show history (1 other update)

5 Jul 2026Briefnewly addedThe Petroleum Ministry withdrew the emergency curbs on natural gas imposed on 9 March under the Natural Gas (Supply Regulation) Order, 2026, issued under the Essential Commodities Act. The curbs had protected household piped gas and compressed natural gas while cutting supply to industry and fertiliser plants. India imports about half its natural gas. The Hindu, 5 Jul 2026: Government withdraws emergency gas curbs imposed during Hormuz disruption as LNG supplies normalise (opens in a new tab) · The Hindu, 6 Jul 2026: What the lifting of gas curbs means. Explained (opens in a new tab)

Incentive for household piped gas connections

Prelims

City Gas Distribution (CGD) companies supply Piped Natural Gas (PNG) to households in place of cooking gas cylinders.

What changed

18 Aug 2026Briefnewly addedCGD companies will get 200 standard cubic metres of cheaper Administered Price Mechanism (APM) gas for each additional billed household PNG connection above set targets. The APM gas replaces costlier imported liquefied natural gas, and should speed the shift away from cylinders. PRS Legislative Research, 18 Aug 2026: Monthly Policy Review, August 2026 (opens in a new tab)

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