Inflation in India is not merely the result of global shocks; it is increasingly a product of high fuel taxes, cesses and pricing policies that amplify costs across the economy. The country’s heavy dependence on petroleum and gas—further entrenched by schemes such as Ujjwala—has made energy prices the trigger for widespread inflation.
A simple Petroleum Ministry advisory in March warning of tighter commercial LPG supplies was enough to push up the cost of everything from the humble pakora to ice cream, paints and construction materials. Pakora sellers say rising gas prices are compounded by costlier edible oils, commodities and transport, creating a cascading inflationary effect that touches almost every household and business. The pakora costs 40 percent more now.
India’s headline retail inflation rose to 3.48 percent (provisional) in April 2026, driven largely by food and beverage costs. Analysts, including those at ICRA, a Moody’s associate, expect headline figures to harden slightly to around 4.1 percent for May due to rising input and transport costs. It is rising now beyond RBI tolerance limits.
If people were taxed less on petrol, they would have eventually spent it on other goods, promoting economic growth and government getting paid taxes anyway. That’s the common cry.
The fuel policy needs immediate review. But bio fuel ethanol that has high moisture (water) is certainly not the solution.
In such scenario, should not the country have reduced petrol prices? It collected Rs 39 lakh crore through high cess, additional excise duties etc “for funding redemption of approximately of Rs 3.3 lakh crore petro-bonds of regimes since 2002”. There is supposed to be a reserve of Rs 36 lakh crore as the benefit of crude falling below $40 a barrel (155 litre) was never passed on to the OMC.
From FY2016 to FY2022, Indian OMCs largely benefited from deregulated fuel pricing, healthy refining margins, and relatively stable crude prices, with profits peaking despite pandemic disruptions. In FY2023 they suffered some losses. Profitability rebounded dramatically in FY2024 with combined earnings of Rs 86,000 crore, moderated to Rs 33,602 crore in FY2025 due to LPG subsidies, and recovered to Rs 77,821 crore in FY2026, driven by normal refining margins and gains from lower-cost crude inventories.
Despite collecting nearly Rs. 36 lakh crore through fuel taxes and cesses, India has largely relied on market-linked fuel pricing rather than using these revenues to help OMCs stabilize prices. As a result, fuel prices remain higher and more volatile than in neighbouring countries such as Bangladesh and Bhutan, where governments more actively regulate or subsidize fuel to contain inflation.
Reliance Industries Limited (RIL), which operates the world’s largest refining hub at Jamnagar and its associated petroleum businesses, achieved an annual net profit of Rs 95,754 crore for the financial year ending March 31 (FY26). This represents a 17.8 percent increase year-on-year. The OMCs have to pay higher taxes. Reliance is exempted from some taxes.
Greedflation, Profits Soar, Workers Lose
Petroleum prices alone are not hiking market prices. Many sectors like education and health are victims of severe price manipulations often called Greedflation. This refers to the practice of companies using economic disruptions —. such as supply-chain bottlenecks, inflation, or commodity price spikes — not merely to cover rising costs but to expand profit margins by raising prices beyond what costs justify.
In India, the concept gained prominence during the post-pandemic recovery as concerns grew that some firms were using inflationary conditions to boost profits while consumers faced rising living costs. The debate centres on whether price increases were driven by genuine cost pressures or by growing corporate pricing power and opportunistic profit-taking.
The correction is difficult for their clout. Data from post-pandemic periods highlighted that the net profits of thousands of listed Indian companies reached historic highs, often multiplying several times over pre-pandemic averages.
Many have expanded profit margins. Many companies have 22 to 45 percent hike in profits. More than half of the increases in corporate profits are reportedly driven by fatter profit margins rather than expanded sales volume.
Unlike traditional cost-push inflation, where rising labour costs drive up prices, the surge in corporate profits was largely decoupled from wage growth. The wages stagnate or even compressed.
A growing number of economists in the U.S. and Europe argue that recent inflation is increasingly “sellers’ inflation”, manipulated by firms.
The RBI needs to look at high prices charged by dominant firms instead of focusing on higher repo rates only. Listed corporate net profits has soared in 2025. Overall, there is strong evidence of expanding corporate margins during inflationary cycles in India.
Education
Rising education cost is a quieter and more consequential form of inflation, and not linked to petrol, that India is overlooking. If the engine of India’s growth is its human capital, then the rising cost of building that human capital is not just a household problem, it is a macroeconomic one.
The Ministry of Education told Lok Sabha across India, over 89,000 government schools were closed or merged over the last decade, with UP (25,126) and Madhya (29,400 ) accounting for more than 60 percent of this total.
This has hit families hard as primary education costs zoom for greedy school managements. There are many more similar areas.
Multiple fuel
NITI Aayog advocates for a technology-agnostic, “multiple fuel policy” to achieve energy security and net-zero emissions, rejecting a strict EV-only approach.
And certainly, the ethanol-based bio-fuel with high water content is not the solution. It drastically reduces petrol energy efficiency. Pure bioethanol has about 33 percent less energy per unit of volume than pure petrol, says the U.S. Department of Energy (DOE) and the U.S. Energy Information Administration (EIA).
The government must stop its use for more than one reasons, including damages caused to the vehicles.
India’s energy and inflation control measures are flawed for many reasons. The overall energy policy, its pricing mechanisms and tax structure require a comprehensive review and reformulation. Short-term interventions may temporarily contain inflation, but they often distort markets, shift costs between consumers, producers and the government, and create uncertainty for investment and long-term planning.
A more durable approach would balance consumer protection with transparent pricing, energy security, fiscal sustainability and incentives for efficiency. Without structural reforms, India risks recurring cycles of price shocks, subsidy burdens and uneven profitability across the energy sector, undermining both economic stability and sustainable growth.
Monday, June 1, 2026