Policy think tank urges phased fuel price alignment Reform

The Indian Council for Research on International Economic Relations (ICRIER) has recommended a gradual pass-through of global fuel prices to retail rates to reduce fiscal strain and improve price signals. 

  The think tank said shielding consumers from rising international prices has shifted the burden to the Budget, weakening fiscal health and increasing macroeconomic risks. India has kept petrol, diesel and LPG prices largely unchanged despite a sharp surge in global crude oil prices following the West Asia conflict. While this has offered short-term relief, ICRIER warned it has heightened pressure on fiscal and external balances, and diluted incentives for energy efficiency and cleaner energy transition. 

  The report cautioned that continuing the current pricing strategy could significantly raise fiscal costs, especially if elevated crude prices persist. This may also affect the government’s target of reducing the debt-to-GDP ratio to 50% by FY31. 

  Higher subsidies and suppressed prices could crowd out priority spending while benefiting higher-income households disproportionately.  It also suggested revisiting the petroleum taxation framework and bringing fuels under the GST regime to protect revenues.