India’s fuel crisis: will the proverbial elephant in the room turn into a peg-lifting camel in the tent?

Subscribe to enjoy similar stories.Prime Minister Narendra Modi’s call urging people to reduce their use of transport fuels is indeed a need of the hour, given the turmoil in West Asia. Our heavy dependence on imports of crude oil, the raw material for what most motor engines burn, means that India’s policy cushions are wearing thin. The government has thus far used state-owned fuel retailers to absorb much of the oil shock since the end of February, when the Iran war began.

It was a choice born of a political calculus, not of economic merit.Retail price hikes could have risked adverse public opinion ahead of polls in four states. Modi’s weekend advice could help lay the ground for the government to get its foot off the brake pedal and let oil retailers raise consumer prices in line with global energy costs. His behavioural nudge is well aimed, as fuel demand clearly needs to drop.

But it’s hardly enough. For one, the government needs to fast-track initiatives designed to improve electric mobility on our streets, the share of which hovers in single digits. Manufacturing incentives are in place, no doubt.

But we need quick gains in the density of charging facilities to boost range confidence among would-be buyers. The viability of a network’s roll-out, however, depends on electricity tariffs charged by state governments, which set retail rates. Given the poor health of distribution utilities under them, charging-station bills often cross-subsidize other segments like household users.To solve this problem, the Centre should deploy a mix of financial inducements in aid of power reforms and insist on moderate tariffs under regulatory oversight.