31

May

From Pakora to Petrol: How Greed, Taxes and Energy Policies Are Leading to Price Rise 

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Shivaji Sarkar

New Delhi | Sunday | May 31, 2026

For millions of Indians, inflation is no longer an abstract economic statistic. It is visible every day—in the rising cost of a plate of pakoras, a litre of petrol, a school fee receipt, a medical bill, or a construction project. While global factors such as supply-chain disruptions and geopolitical tensions have contributed to higher prices worldwide, India's inflation story is increasingly shaped by domestic policies, fuel taxation, corporate pricing behaviour and structural weaknesses in key sectors.

At the centre of the problem lies India's heavy dependence on petroleum products and gas. Energy costs influence virtually every aspect of economic activity—from transportation and manufacturing to agriculture and retail distribution. As a result, any increase in fuel prices quickly cascades through the economy.

A recent Petroleum Ministry advisory warning of tighter commercial LPG supplies was enough to push up costs across several sectors. The impact was felt not only by restaurants and food vendors but also by industries producing paints, chemicals, ice cream and construction materials. Small vendors report that rising cooking gas prices, combined with costlier edible oils, transport charges and raw materials, have sharply increased their operating costs. The humble pakora, they say, costs nearly 40 per cent more than it did a few years ago.

India's retail inflation stood at 3.48 per cent in April 2026, but economists expect price pressures to intensify. Rising input costs and transportation expenses are likely to push inflation higher in coming months, testing the limits of the Reserve Bank of India's comfort zone.

A major reason is India's fuel taxation regime. Over the years, the Centre and states have collected enormous revenues through excise duties, cesses and other levies on petroleum products. Critics argue that if consumers had retained a larger share of this money through lower fuel prices, much of it would have been spent elsewhere in the economy, stimulating growth while still generating tax revenues through increased economic activity.

The government has defended these taxes partly on the grounds that they helped fund the redemption of petroleum bonds issued by previous administrations. Yet questions persist. During periods when global crude prices fell sharply, the full benefits were often not passed on to consumers. Instead, tax collections continued to rise, creating what many analysts view as a substantial fiscal cushion.

India's public-sector Oil Marketing Companies (OMCs) have experienced dramatic swings in profitability. After enjoying strong earnings during the years of deregulated fuel pricing, they faced pressures in FY2023 before rebounding strongly. Combined profits rose sharply in FY2024, moderated somewhat in FY2025 because of LPG subsidy obligations, and recovered again in FY2026. The gains were aided by favourable refining margins and lower-cost crude inventories.

Yet despite massive tax collections from petroleum products, India has largely relied on market-linked fuel pricing rather than using these revenues to stabilize prices. Consequently, fuel prices remain relatively high and volatile, contributing significantly to inflationary pressures throughout the economy.

Alongside fuel-driven inflation, another phenomenon has emerged: "greedflation." The term refers to situations where companies raise prices far beyond increases in their actual costs, using inflationary conditions as an opportunity to expand profit margins.

The debate has intensified in India during the post-pandemic period. Corporate earnings across many sectors have reached record highs. In numerous industries, profit growth has significantly outpaced growth in sales volumes. Analysts estimate that a substantial portion of recent profit expansion has come not from increased productivity or market expansion but from wider margins and stronger pricing power.

What makes this trend particularly concerning is that it has occurred alongside stagnant wage growth. Unlike traditional inflation, where rising wages contribute to higher prices, the current cycle has seen corporate profits rise sharply while many workers struggle to maintain their purchasing power. The result is growing pressure on household budgets despite healthy corporate balance sheets.

Increasingly, economists around the world are questioning whether recent inflation reflects not merely higher costs but also the ability of dominant firms to exercise pricing power. This raises important policy questions for regulators and central banks. Controlling inflation solely through higher interest rates may not be sufficient if market concentration and excessive pricing power are also driving prices upward.

Education provides another example of inflation that receives too little attention. Unlike fuel inflation, rising education costs are less visible but potentially more damaging in the long run. Human capital is the foundation of India's economic future, yet the cost of acquiring quality education continues to rise faster than household incomes.

Government data show that thousands of government schools have been closed or merged during the past decade. This has increased dependence on private institutions in many regions, giving school operators greater pricing power. Families already burdened by food, fuel and housing costs are increasingly struggling to finance their children's education.

India's broader energy strategy also requires reassessment. NITI Aayog has advocated a technology-neutral, multiple-fuel approach rather than an exclusive focus on electric vehicles. Such flexibility may prove beneficial for long-term energy security.

However, concerns remain regarding the aggressive promotion of ethanol-blended fuels. Ethanol contains less energy per litre than conventional petrol, resulting in lower fuel efficiency. Questions have also been raised about its impact on vehicle performance and maintenance costs. Policymakers must carefully weigh environmental objectives against consumer costs and technological realities.

India's inflation challenge cannot be solved through temporary measures alone. The country's energy pricing system, fuel tax structure and broader inflation-management framework require comprehensive review. Short-term interventions may moderate price spikes, but they often create distortions, shift burdens among consumers and producers, and discourage long-term investment.

A sustainable strategy must balance consumer protection, transparent pricing, fiscal responsibility, energy security and market efficiency. Without deeper structural reforms, India risks remaining trapped in recurring cycles of fuel shocks, inflationary pressures, subsidy burdens and uneven corporate gains—an outcome that would undermine both economic stability and inclusive growth.

The real challenge is no longer merely controlling inflation. It is ensuring that economic growth benefits consumers as much as it benefits governments and corporations.

Prof Shivaji is a senior journalist specialising in financial matters and a media activist 

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