India enforces fuel austerity and hikes pump prices to counter oil shock

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WHAT WE’RE TRACKING TODAY

ICRA trims India growth forecast but RBI payout will cushion revenue shortfall

Good morning, lovely people, and happy hump day. Today’s issue is packed with energy news — from retail fuel price hike to macroeconomic headwinds as another ratings agency trims India’s GDP forecast. To soften the fiscal blow, the Reserve Bank of India is stepping up with a massive, potential INR 3 tn dividend payout.

The policy response is in overdrive: The government is rolling out everything from import curbs to strict fuel austerity measures across state-run institutions, alongside an ambitious USD 1 bn EV push for commercial fleets.

MEANWHILE- Shares of Indian ports-to-power conglomerate Adani Group gained over 5%, after three US agencies resolved their judicial proceedings against Asia’s richest man Gautam Adani and his associates. The US Justice Department dropped criminal fraud charges linked to Indian power contract bribery allegations. Separately, the US Securities and Exchange Commission settled its civil lawsuit, and Adani Enterprises agreed to pay USD 275 mn to resolve alleged sanctions violations concerning LPG imports from Iran.

^^ We have more on the legal relief for the Adani Group (what it means for the conglomerate) in this morning’s Planet Finance.

Oil shock enters India’s growth math

Rating agency ICRA trimmed India’s FY 2027 growth forecast to 6.2%, down from its earlier projection of 6.5%, under the assumption that crude oil prices will average USD 95 / bbl during the fiscal year, according to a note (pdf). Based on this assumption, CPI inflation is projected at 4.7%, while the fiscal deficit is estimated at 4.7% of GDP.

“ICRA now assumes crude oil prices to average at USD 95 / bbl in FY 2027, against our prior estimate of USD 85 / bbl, given the ongoing stickiness in prices amid the stalemate in the Middle East. Consequently, we have pared our baseline forecast for the FY 2027 GDP growth,” the agency’s chief economist Aditi Nayar said.

Furthermore: If crude averages USD 105 / bbl in FY 2027, ICRA projects GDP growth would slow to 5.8%, while CPI inflation would accelerate to 5% and the fiscal deficit would widen to 5% of GDP. Under its USD 95 / bbl baseline, the agency expects the Middle East conflict to add INR 1.15 tn (0.3% of GDP) to the government’s fiscal gap.

The drag is already showing up: ICRA expects 4Q FY 2026 (ended on 31 March) GDP growth to slow to 7% from 7.8% in the previous quarter, taking the growth rate for the fiscal year to 7.5%. This comes on the back of a 2.8% y-o-y decline in merchandise exports and a slower industrial growth amid higher input costs and supply-chain disruptions during the quarter.

RBI payout to cushion oil shock

India’s central bank dividend is becoming a fiscal shock absorber as the Iran war impacts the fiscal math. The Reserve Bank of India (RBI) may transfer close to INR 3 tn (USD 31.2 bn) to the government this week, with some economists' estimates going as high as INR 3.4 tn, Bloomberg reports. The central bank’s board is expected to meet on Friday to approve the transfer, which would exceed last year’s INR 2.69 tn payout. The payout will come from the RBI’s income on forex, government securities, liquidity operations, and currency-printing fees.

Why it matters: The timing gives the government a revenue buffer against a war-led rise in crude prices. A larger RBI dividend provides the government with more non-tax revenue, which could help mitigate borrowing pressures should energy and fertilizer costs rise further.

This is India’s fiscal cushion against a Middle East energy shock. The dividend does not offset the risk of higher crude prices, but it gives the government more fiscal headroom to absorb the first hit without immediately cutting spending or borrowing more.

Hormuz rerun for Indian ships

India is preparing to send state-owned tankers back into the Strait of Hormuz to load energy cargoes from Middle East suppliers, the first such move since the Iran war disrupted shipping through the waterway, Bloomberg reports, citing unnamed sources.

Energy security overrides risk: The plans are operationally ready, pending final government approval. State-run Shipping Corporation of India is prepared to resume Gulf operations once it receives clearance from the Indian Navy and booking commitments from refiners.

Why it matters: India, battling surging energy costs, has spent weeks relying on Russian crude — which comes with sanctions risks — to plug supply gaps. Alternative cargoes mean longer voyages and higher freight costs, making Middle Eastern barrels hard to replace.

Military escort and cover: New Delhi has ramped up naval deployment in the region, doubling warship presence and expanding aerial surveillance. Indian naval vessels are escorting India-bound ships once they exit the strait, while the state has also rolled out a marine ins. framework to maintain coverage for cargoes moving through high-risk waters.

PSA

Saudi Arabia-based low-cost airline Flyadeal will launch daily flights between Riyadh and Hyderabad starting 1 July, marking its first regular scheduled service to India, Flyadeal CEO Sanjiv Kapoor said on LinkedIn. More India routes will follow soon, with Flyadeal serving price-conscious travelers while its sister airline Saudia continues full-service operations.

Happening today

Prime Minister Narendra Modi landed in Rome today for talks with Italian counterpart Giorgia Meloni, on the last leg of his five-nation tour, as per his post on X. The visit has triggered the meme-machines for a now-familiar ‘ Melodi ’ partnership. Beyond the social media optics, we watch out for harder takeaways — expected later today — around defence, manufacturing, clean energy, and if the needle moves on India-Italy investment ties.

The big story abroad

With Kevin Warsh poised to take the helm of the Federal Reserve this Friday, business headlines are focusing on rising treasury yields that could complicate his expected dovish agenda. Investors may demand higher returns for long-term debt, especially amid rising energy prices, a resilient economy, and the highest yield on treasuries in almost 20 years.

Meanwhile, in the tech world: Google is further integrating AI in its search function while introducing what it calls Gemini Spark, an AI “agent” that is designed to function independently and act on a user’s behalf. The tech giant is also rolling out smart glasses that will include a camera and speakers in a bid to challenge moves made by its rival Meta.

And speaking of AI: Standard Chartered is looking to slash some 8k jobs in favor of relying more heavily on AI, with cuts affecting its human resources and risk and compliance functions. The company’s CEO Bill Winters has characterized the move as a shift away from “lower-value human capital.”

ALSO: Elon Musk’s SpaceX has reportedly tapped Goldman Sachs to lead its highly anticipated IPO, with the bank set to assume the most prominent spot among the underwriters involved. Goldman and Morgan Stanley will reportedly be serving as lead bankers.

Good news for Arsenal fans: For the first time in 22 years, Arsenal FC took home the Premier League championship after Manchester City tied in yesterday’s showdown with Bournemouth. The Gunners, under the leadership of Mikel Arteta, have secured a total of 82 points.

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War reaches the pump

India’s state-run fuel retailers hiked petrol and diesel prices for the second time in a week — ending years of price controls as the war drives crude costs higher, Reuters reports. Prices rose by about INR 0.9 (USD 0.009) per liter on Tuesday, taking pump prices to INR 98.6 (USD 1.03) for gasoline and INR 91.5 (USD 0.9) for diesel.

IN CONTEXT- Last Friday, India broke a four-year retail price freeze by announcing a jump in pump prices by INR 3. The increase remains modest relative to a near 50% rise in global crude prices, leaving state-run refiners, including Indian Oil, Bharat Petroleum, and Hindustan Petroleum, to absorb daily revenue losses of around INR 10 bn (USD 104 mn).

The price will partially offset those losses as refiners will continue losing roughly INR 7.5 bn (USD 78 mn) daily, according to Petroleum Ministry’s Joint Secretary Sujata Sharma (watch, runtime: 3:12). Further staggered increases are anticipated, similar to the calibrated hikes seen in 2022 — when pump prices were revised 13 times in a fortnight following the Russia-Ukraine war. No government bailout package for refiners is currently under consideration, Sharma clarified, despite mounting pressure on their balance sheets.

The timing is politically sensitive

Politics of pricing energy: India’s opposition leaders argue the government delayed revisions through recent state elections to avoid voter backlash. Now, with Brent crude above USD 110 / bbl, the Modi government is facing growing pressure to balance consumer protection with fiscal and energy realities. Meanwhile, Prime Minister Narendra Modi has urged citizens to ration fuel and reduce discretionary spending.

Why it matters: The financial distress of Indian refiners has already triggered disruptive supply-chain rationing. India instituted strict supply control measures on commercial LPG, with April consumption down 16.2% y-o-y. Any prolonged capital squeeze at these Indian oil majors threatens to delay multi-bn-USD downstream and petrochemical expansion projects — all tied to long-term crude supply agreements and strategic JVs with Gulf national oil companies.

Fuel demand trends diverge: Petrol consumption rose 6.36% y-o-y in April to 3.6 mn tons, while diesel demand remained largely flat. LPG consumption, however, fell sharply after supply restrictions on commercial cylinders, with allocations only gradually being restored.

Airlines seek fuel relief

India’s airlines are now seeking the same price protection long extended to retail consumers. Carriers including Air India, IndiGo, and SpiceJet have asked state-run refiners to defer any increase in aviation turbine fuel (ATF) prices for domestic flights until the Iran conflict stabilizes, The Economic Times reports. The proposal for a hike is under discussion between refiners and the Ministry of Petroleum and Natural Gas for a decision before 1 June.

Pressure on airlines intensifies: State refiners are reportedly selling domestic jet fuel at about USD 1k per kiloliter while incurring losses of roughly USD 955 per kiloliter. Fuel accounts for nearly 40% of airline operating costs in India. Meanwhile, a weaker INR is inflating USD-denominated expenses such as aircraft leases and overseas airport charges.

Turbulent times ahead: Indian carriers are already thinning flight schedules and warning of outright suspensions. The conflict has also disrupted air corridors to Europe and North America, forcing Indian carriers into longer routes and higher fares that are beginning to depress demand.

Fuel austerity, import controls, and a USD 1 bn EV push to ease energy squeeze

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.

(** Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

Spot buying

State-run refiner Bharat Petroleum Corporation (BPCL) is reviewing its crude imports on a near-daily basis and scaling up spot market purchases, Reuters reports, citing Chairman Sanjay Khanna. The shift comes in the wake of the Strait of Hormuz closure, which has disrupted established supply chains and sent crude prices soaring.

BPCL originally planned on sourcing 55% of its FY 2027 crude via annual contracts, heavily leaning on Middle Eastern producers. With several Gulf suppliers declaring force majeure, the refiner has been forced to tap into the spot market to ensure its three Indian facilities — which hold a combined capacity of 706k bbl / d — remain operational at a 115% capacity.

The fallback option is not as profitable: While Russian crude continues to meet roughly 40-45% of BPCL’s requirements, the financial buffer it once provided is shrinking. Markdowns on Russian oil have narrowed significantly to USD 5-6 5-6 / bbl against dated Brent, down from the USD 10-12 / bbl seen earlier.

All eyes are now on Saudi flows: BPCL expects the reliance on spot cargoes to ease if Saudi Arabia successfully restores capacity along its east-west pipeline. However, Aramco has only committed a small volume through the pipeline so far.

Mounting price pressure: The forced shift to spot buying coincides with a sustained freeze on domestic fuel prices, leaving state-backed refiners to foot the bill. Even after India raised retail fuel prices twice in a single week, BPCL continues to lose INR 25-30 per liter on diesel and INR 10-14 per liter on gasoline.

Why it matters: BPCL is currently caught in a squeeze amid unpredictable Gulf term supplies, heightened exposure to spot market volatility, and evaporating savings from Russian barrels. While spot purchases offer operational flexibility to keep refineries running, they also expose the company to daily price fluctuations and elevated freight risks.

Indian oil assures fuel stocks

Meanwhile, another state-run refiner, Indian Oil Corporation (IOC), has crude inventories for more than a month despite ongoing disruptions, Finance Director Anuj Jain said in comments picked up by Hindu Businessline. “LPG inventories have come down, but it is still being managed so that we have enough LPG availability pan-India basis.”

Diversification eases pain: Bottled cooking gas faced early supply constraints after disruptions in the Gulf, but IOC has since diversified sources to stabilize availability, Jain said. IOC expanded spot purchases from Indonesia, Nigeria, Angola, and Oman to meet the supply shortfall. Elevated spot prices are forcing the refiners to choose between passing costs to consumers or absorbing them internally.

(** Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

MakeMyTrip’s earnings drop 30%

Gurugram-based online travel company MakeMyTrip saw a 29.8% y-o-y drop in its net income in 4Q FY 2026 as the ongoing war dampens outbound travel demand, as per an earnings release. Revenue rose 1.9% y-o-y to INR 24 bn (USD 250.1 mn) in 4Q.

Tensions reshape strategy: The Iran war continues to batter international travel sentiment, pushing the company to pivot aggressively toward domestic tourism and short-haul regional destinations. Domestic holiday packages and corporate travel bookings held strong throughout the quarter, while the company's bus ticketing arm and ancillary businesses provided a much-needed buffer for the top line.

Why it matters: MakeMyTrip's operational shift captures the impact of regional instability in the aviation and hospitality sectors across the MENA-India corridor. Rather than waiting for the geopolitical storm to pass, major Indian travel operators are actively burrowing into domestic markets to defend their yields while volatile borders continue to stall long-haul global growth.

The USD 10 bn ticket out

In the span of a few hours on Monday, the case against Asia’s richest man fell apart. The US Department of Justice moved to drop criminal fraud charges against Gautam Adani “with prejudice” — meaning they cannot be refiled — while the US Treasury Department simultaneously resolved a sanctions-related probe involving Adani Enterprises with a USD 275 mn settlement, Bloomberg reports. The SEC’s civil fraud case settled the week prior for USD 18 mn in penalties. The reported price of relief? A USD 10 bn investment pledge in the US.

The Adani Group entered the courtroom on Monday with USD 29 bn in net debt, 41% of which it owed to global banks and capital markets, CNBC reports. It left the courtroom with access to the international capital markets, which had been restricted for nearly 18 months.

Timing is everything: Adani’s clearance comes only four days after Indian Prime Minister Narendra Modi touched down in the UAE for a visit that produced a pile of agreements across banking, sovereign infrastructure co-investment, shipping repair, and AI.

The Adani Group sits inside nearly every category discussed during the visit. The conglomerate manages logistics infrastructure across multiple GCC trade corridors and runs the ports, power, and renewables platforms that absorb a meaningful share of GCC-India physical trade. The sanctions overhang on the corridor’s largest single non-state infrastructure player was a binding constraint that has now been lifted.

The implications of the ruling unravel in different directions. For GCC sovereign wealth funds, the Adani resolution clears a counterparty risk that has quietly been impacting co-investment discussions for the past year and a half. The next round of deployments — into ports, logistics, renewables, transmission, and data centers — is where Adani inevitably appears as a partner, and that round was on hold.

Second, the Dubai-based trading intermediary at the center of the Treasury sanctions settlement serves as an enforcement precedent. The probe focused on LPG allegedly originating in Iran but documented as Omani or Iraqi and channeled through a Dubai trader. Now, every GCC commercial player in the India-bound energy trade will be expected to absorb tighter compliance costs at exactly the moment the corridor is being scaled.

Third, the USD 10 bn US investment pledge is the template. It is the cost-of-doing-business price for regulatory relief for a non-US conglomerate with deep US capital markets exposure. Every globally significant Gulf or Indian entity facing similar pressure — and there may be more, given the war’s pressure on trade flows through Hormuz, Fujairah, and the Red Sea — now has a reference point.

MARKETS THIS MORNING-

Asia-Pacific markets were down this morning, with investors adopting a wait-and-see approach as they digest higher bond yields and geopolitical tensions. Japan’s Nikkei was down 1.7%, and South Korea’s Kospi was down almost 2%.

Sensex	75,376	+0.2% (YTD: -11.5%)
NIFTY 50	23,682	+0.2% (YTD: -9.3%)
ADX	9,588	-0.6% (YTD: -4.04%)
DFM	5,641	-0.3% (YTD: -6.7%)
Tadawul	10,961	-0.1% (YTD: +4.4%)
EGX30	52,555	-0.4% (YTD: +25.6%)
Boursa Kuwait	8,498	-0.4% (YTD: +2.3%)
QSE	10,381	-0.3% (YTD: -3.5%)
S&P 500	7,353.61	-0.6% (YTD: +7.4%)
FTSE 100	10,317	-0.1% (YTD: +3.8%)
Euro Stoxx 50	5,878	+0.4% (YTD: +1.5%)
Brent crude	USD 109	-1.8%
Natural gas (Nymex)	USD 3	+1.9%
Gold	USD 4,486	-1.5%
BTC	USD 77,434	+0.8%

The values in the table above are listed according to the market position as of 3:30pm IST / 2pm GST.

India pitches ships and energy cooperation in Norway

India is pitching Norway on parts of its economy that match Oslo’s strengths in ships, energy, and long-term capital. Prime Minister Narendra Modi invited Norwegian companies to invest in India’s clean energy, manufacturing, shipbuilding, nutrition, and health sectors at the India-Norway Business and Research Summit in Oslo, according to a post on X.

The pitch comes as India tries to turn its European tour into investment follow-through, with New Delhi pointing to tax, labor code, and governance reforms, along with lower compliance requirements, to make the case for fresh Norwegian capital, Press Trust of India reports.

The clearest target is shipbuilding. Modi wants India to build 25% of Norway’s ships over the next five years, up from 10% currently, as New Delhi tries to turn shipbuilding into a strategic priority.

Capital framework: The investment push sits under the Trade and Economic Partnership Agreement, which carries a target of INR 9.6 tn (USD 100 bn) in investments and 1 mn jobs over 15 years. India has also set up a dedicated Norway desk under Invest India, giving Norwegian investors a formal route into sectors New Delhi wants to scale. Modi also invited Norway’s sovereign wealth fund to partner in India’s clean energy sector, tying sovereign capital to India’s energy-transition pipeline.

CALENDAR

MAY

26 May (Tuesday): Eid Al-Adha.

JUNE

15-17 June (Monday-Wednesday): Prime Minister Narendra Modi to attend G7 Summit in Evian, France.

18-21 June (Thursday-Sunday): Bharat Buildcon, Yashobhoomi, Dwarka, Delhi.

24-25 June (Wednesday-Thursday): India Homeland Security Expo, Bharat Mandapam, Pragati Maidan, New Delhi.

26 June (Friday): Muharram.

Signposted to happen sometime in 1H 2026:

Signing of India-Qatar FreeTrade Agreement (Details yet to be announced);
India-EU Trade and Technology Council Ministerial Meeting, Brussels, Belgium;
India to host the Brics Summit.

JULY

1-3 July (Wednesday-Friday): Seafood Expo Bharat, Chennai Trade Centre, Chennai.

3-4 July (Friday-Saturday): Rail & Transit Expo (RailTrans), Bharat Mandapam, New Delhi

3-4 July (Friday-Saturday): SOMS International Exhibition & Conference, Gandhinagar, Gujarat.

8-10 July (Wednesday-Friday): India Energy Storage Week, New Delhi.

14-17 July (Tuesday-Friday) Bharat Tex, New Delhi.

22-24 July (Wednesday-Friday): Rail & Metro Technology Conclave, Bharat Mandapam, New Delhi.

AUGUST

15 August (Saturday): Independence Day.

26 August (Wednesday): Prophet Mohammad’s Birthday.

SEPTEMBER

1-3 September (Tuesday-Thursday): India Energy Week, Dwarka, New Delhi.

1-6 September (Monday-Saturday): Dubai Fashion Week, Dubai Design District.

7 September (Sunday) Opec+ meet to discuss production policy for October.

7-9 September (Monday-Wednesday): iPHEX 2026 International Pharmaceutical Exhibition, Bharat Mandapam, New Delhi.

8-11 September (Tuesday-Friday): Global Fintech Fest, Mumbai.

9 September (Tuesday): Envision 2025, Atlantis, The Royal, Dubai.

17-19 September (Thursday-Saturday) : Semicon India Conference, Yashobhoomi, Delhi.

OCTOBER

2 October (Friday): Gandhi Jayanti (Mahatma Gandhi’s Birthday).

20 October (Tuesday): Dussehra.

NOVEMBER

24 November (Tuesday): Guru Nanak Jayanti.

DECEMBER

8-11 December (Tuesday-Thursday), Expand North Star, Dubai.

25 December (Friday): Christmas Day.

Signposted to happen sometime in 2H 2026:

Monsoon Session of Parliament is expected to be held in July/August in New Delhi (TBA);
Reserve Bank of India’s Monetary Policy Committee meeting for the September cycle (TBA);
India Mobile Congress will likely be held in October in New Delhi (TBA).

JANUARY 2027

30 January-3 February (Saturday-Wednesday): Printpack India, India Expo Centre, Greater Noida (Delhi NCR).

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India enforces fuel austerity and hikes pump prices to counter oil shock

Today at a glance

ICRA trims India growth forecast but RBI payout will cushion revenue shortfall