Petrol and Diesel Shortage in India Attributed to Arbitrage-Related Local Disruptions

India Dismisses Fears of Fuel Shortage Amid Geopolitical Volatility

The Indian government has asserted that the country has "more than adequate supplies of petrol and diesel" to meet domestic demand, dismissing concerns over fuel supply following fresh geopolitical volatility in West Asia and four fuel price hikes in May. In a statement released on Thursday, the government said that India's refining capacity currently stands at 258.1 million tonnes per annum across 22 operational refineries, while domestic petroleum consumption in FY26 was 243.2 million tonnes.

The statement also noted that India exported 61.5 million tonnes of petroleum products during the year, making it one of the world's largest exporters of refined fuel. The government said that there is no supply issue of any kind, and that Petroleum Minister Hardeep Singh Puri has been in constant touch with public sector oil marketing companies (OMCs), state governments, and industry bodies to ensure uninterrupted supply of petrol and diesel across the country.

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To address concerns over fuel supply, the government has been in constant communication with senior officials, including the Secretary of Petroleum and Natural Gas, who have held discussions with Chief Secretaries of states and Union Territories, as well as industry bodies FICCI and CII, to review the situation. The Centre explained that the issue in some areas is not a shortage of fuel but "a pattern of arbitrage that is creating the appearance" of scarcity.

According to the statement, the government has alleged that some industrial consumers are diverting purchases from industrial supply channels to retail fuel pumps in order to benefit from lower retail prices. This shift is putting pressure on retail outlets and creating localised shortages. The statement further noted that private oil marketing companies have seen an around 38% decline in high-speed diesel (HSD) offtake this month because of higher prices, with volumes shifting to PSU retail outlets.

The Centre has taken a "serious view" of the matter and has asked industry associations to caution members against such practices. States and Union Territories have also been urged to form special squads and take strict action against black marketing, hoarding, unauthorised stocking, and diversion of petroleum products under provisions of the Essential Commodities Act. The government remains closely monitoring the international situation and urges citizens to rely only on official communication and "disregard rumours that mistake an arbitrage problem for a supply problem."

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