International supply chains are immensely sophisticated lattice-works. If one part is disrupted, the effect rippling across can be intense and chaotic. The expanding conflict in the Persian Gulf has highlighted this reality by not just disrupting oil and gas supplies, but by affecting hundreds of downstream products—chemicals derived from petroleum that are used to manufacture everyday and high-tech products that include fertilisers, pharmaceuticals and semiconductors as much as detergents, dyes and plastics. For Asian countries, the supply of many of these products is either severely restricted or on the slow lane as they make their way eastwards around the Cape of Good Hope. For India, the spiralling effect of jammed tankers and shut airports is severe.
Among the sectors the depleting gas reserves are affecting are restaurants and hotels, large employers in a job-starved India. As more units shut down partly or fully, migrant workers powering their kitchens are filing back home. An estimated three-fifths of the workers in Gujarat’s ceramics hub Morbi have returned home as the propane that fires the kilns is in short supply. Energy shortages have forced Surat’s vibrant textile units to operate only five days a week. India’s urea production has dropped by a fourth in March. Though the government is rightly advising calm to avoid panic and hoarding, domestic LPG cylinders are being sold on the black market at many times the official price.
Like some other nations, India has held on to its fuel prices at the pump by slashing excise rates. This might change dramatically if the war drags on, which it is showing signs of, once the election season gets over at the end of April. Once the pump rates begin to increase, the rising inflation and falling rupee would act as severe drags on GDP growth that was earlier expected at 7.2-7.4 percent for the next fiscal. The options to mitigate the shortages are few. However, urgent steps need to be taken to stretch out the energy resources by ensuring a more even distribution of fuel and cooking gas, and preventing panic buying. Rationing may be the last recourse. If this indeed ends up being a disruption similar to the pandemic, we must come together in the same spirit of helping and sharing.