NEW DELHI: It is “inevitable” for countries to pass on higher energy costs to households and industries, according to the Union finance ministry.
“Some countries have begun to allow prices to be passed on to end-users – households and businesses. Some are yet to do so. But it is inevitable,” the finance ministry said in its monthly economic review, released on Wednesday. It added that during times of supply disruption, demand has to moderate; otherwise, countries will have to pay a much higher price for energy supplies.
Calling for macroeconomic stability, it said any attempts to restore near-term growth may cause significant harm to medium- to long-term growth prospects. The ministry also hinted at prolonged pain, saying restoring energy supplies would take time.
“Many international agencies appear guilty of assuming a swift restoration of normalcy to energy supplies. The forecasts do not appear to account for the time required to restore production and resume shipping,” it said, adding that energy prices may stay at higher levels.
India’s crude oil basket averaged $113 per barrel in March, and it is just under $115 per barrel for April. According to an ICRA report, marketing margins are estimated at negative Rs 14/litre and Rs 18/litre for petrol and diesel, respectively. It further noted that domestic LPG under recoveries are estimated at Rs 80,000 crore for FY27.
According to the ministry, the crisis must be treated as an opportunity to carry out more reforms, including prioritising energy security by creating strategic reserves. It said the domestic decriminalisation and deregulation agenda should proceed irrespective of external developments. Also, regulatory simplification that lowers the cost of imports and exports will be particularly valuable in these times.