Fuel austerity and import curbs: India scrambles to stem the Iran war fallout

India’s fuel austerity measures enter the daily operations of state-owned financial firms: The Finance Ministry instructed public-sector banks, insurers, and other state-run financial institutions to reduce fuel consumption by moving meetings online, limiting overseas travel, and using electric vehicles where possible, Bloomberg reports, citing a government document. The aim is to cut fuel use, reduce avoidable spending, and preserve foreign exchange.

Why it matters: India is trying to cut fuel demand and conserve USD as higher Middle East energy costs pressure the INR — the same logic behind higher gold duties, tighter precious-metals import rules, fuel price hikes, and proposed tax relief for foreign bond investors. This comes as the INR fell to another record low today, touching 96.9 / USD — the weakest performance among Asian currencies this year.

For the India-MENA corridor, the signal is that the energy disruption is now rippling into the day-to-day operations of state-run institutions and more such measures will become the norm in the coming days.

Curbs on imports are also coming

The government is also considering import control measures to defend the INR amid a widening trade deficit. The Modi government is reviewing curbs on non-essential imports and goods already made domestically, after India’s merchandise trade deficit widened to USD 28.4 bn in April from USD 20.7 bn in March, The Economic Times reports, citing unnamed officials. Widening trade deficit is adding to downward pressure on the currency amid tepid foreign investor sentiment.

Various ministries have been asked to identify items that can be slapped with higher duties or selective curbs. Such a move would be time-bound and calibrated to avoid impact on essential goods or manufacturing supply chains, officials told the daily.

USD 1 bn EV push

India is considering incentives exceeding USD 1 bn (INR 95 bn) to accelerate the uptake of electric buses and trucks as the state seeks to reduce diesel dependence amid the looming energy crisis, Bloomberg reports. Discussions involving the Prime Minister’s office, lenders, and industry stakeholders are expected later this month.

The nitty-gritty: The proposed decade-long program will target India’s largely private commercial vehicle fleet, focusing on intercity bus operators. Interest subsidies of up to INR 1.5 mn (USD 17.5k) per vehicle are under consideration alongside partial credit backstops. Initial support will be rolled out for 10k buses, scaling up to 40-50k vehicles. Charging parks, electricity concessions, and toll waivers to improve economics for fleet operators are also being discussed.

Although there is a growing concern over India’s exposure to imported fossil fuels, electrifying commercial transport would marginally reduce diesel demand as the rollout will likely take months before benefits start trickling.

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