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Correspondent

21 August 2024 at 10:20:16 am

Fuel Shock

The latest increase in petrol and diesel prices — the fourth hike in just 11 days — underlines how vulnerable India remains to geopolitical turmoil and its own unfinished reforms in the energy sector. Brent crude surged again after fresh American military strikes in southern Iran deepened fears of the renewal of the Iran conflict on a higher scale. Markets are now gripped by uncertainty as hopes of a negotiated settlement continue to fade. For a country like India, which imports more than 80...

Fuel Shock

The latest increase in petrol and diesel prices — the fourth hike in just 11 days — underlines how vulnerable India remains to geopolitical turmoil and its own unfinished reforms in the energy sector. Brent crude surged again after fresh American military strikes in southern Iran deepened fears of the renewal of the Iran conflict on a higher scale. Markets are now gripped by uncertainty as hopes of a negotiated settlement continue to fade. For a country like India, which imports more than 80 percent of its crude oil requirements, every geopolitical tremor in the Gulf quickly translates into pain at the fuel pump. Since May 15, petrol and diesel prices have risen cumulatively by nearly Rs. 7.5 per litre. In Hyderabad and Thiruvananthapuram, petrol has crossed Rs. 115 a litre. Mumbai, Kolkata, Bengaluru and Chennai are all witnessing sharp increases. Even Delhi, traditionally cushioned by relatively lower taxes, has seen petrol move beyond Rs. 102 per litre. This marks a significant shift after nearly four years of relative stability in retail fuel prices. For long periods, state-run oil marketing companies absorbed the burden of elevated crude prices, shrinking refining margins and a weakening rupee. Political considerations, particularly around elections, often delayed price revisions. The Rs. 2 per litre reduction announced ahead of the 2024 national elections was a reminder that fuel pricing in India has never been entirely divorced from politics. But oil companies cannot indefinitely absorb mounting losses, especially when global crude prices remain elevated. The Centre has already cut excise duties, with Finance Minister Nirmala Sitharaman estimating the revenue sacrifice at nearly Rs. 1 lakh crore. That fiscal cushion has now largely been exhausted. The spotlight is therefore shifting towards states. VAT on fuel remains one of the most lucrative revenue streams for state governments, with some states imposing levies exceeding 30 percent through taxes and cess components. This explains why states such as Telangana, Kerala and West Bengal continue to record some of the highest retail fuel prices in the country. The Centre is now subtly nudging states to reduce VAT rates to soften the blow on consumers. Yet states are reluctant. Their dependence on fuel taxes is structural, not incidental. Apart from excise on liquor, few revenue sources offer such steady and politically manageable returns. Bringing petrol and diesel under the GST framework continues to face bipartisan resistance from states fearful of losing fiscal autonomy. Rising fuel prices do not remain confined to petrol stations. They seep into every layer of the economy as transportation costs rise, food inflation accelerates and household budgets shrink. Small businesses, already coping with weak consumption and high borrowing costs, are facing renewed pressure. India’s recurring vulnerability to crude oil shocks exposes the limits of its energy security architecture. Expansion of strategic petroleum reserves and greater investment in renewable energy can no longer remain aspirational talking points. They must become urgent national priorities.

Regime Reckoning

Netanyahu’s airstrikes on Iran aim not just to degrade its nuclear capacity, but to unseat its rulers.

For decades, Israel has warned of the allegedly existential menace posed by Iran’s theocratic regime following the latter’s race to turn nuclear and its sponsorship of terror against the Jewish state cloaked in revolutionary zeal. Last week, after years of shadow wars and covert skirmishes, Benjamin Netanyahu took the fight to the heart of Iran’s military elite. The Israeli prime minister, often derided for his hawkish instincts, launched Operation Rising Lion in what may become his most consequential gambit yet: to shake the foundations of the Islamic Republic.


The missile strikes, which were aimed at dismantling Iran’s nuclear facilities, were surgical and devastating besides killing several of Iran’s military and scientific elite. Expectedly, Tehran retaliated by lobbing missiles against Israeli cities.


But Netanyahu’s ambitions go further. His language, unusually directed at the Iranian people themselves, suggests a long-term goal in encouraging a popular uprising to bring down Iran’s repressive Islamic regime of the Ayatollahs that has dominated the country since 1979.


The strategy is risky. For years, Western efforts to engage Iran diplomatically have yielded diminishing returns. The clerical regime has advanced its nuclear enrichment, expanded its proxy networks across the Arab world and brutally repressed dissent at home. Netanyahu’s view, long unpopular in European capitals but quietly acknowledged in others, is that Iran’s regime is a destabilising force whose survival is antithetical to regional peace.


The patience with Iran ran out on the morning of October 7, 2023, when thousands of Hamas militants (aided and abetted by Iran) broke through Israeli border fences and launched the bloodiest assault in the country’s history, they were not merely testing the resilience of the Israeli state. Since then, Netanyahu has unleashed a military doctrine with few recent parallels in Israeli history.


Rather than contain or manage the problem, Israel is now systematically dismantling Iran’s axis of resistance by pounding Gaza, finishing off the Hamas’ leadership, decimating Iran’s biggest proxy Hezbollah in Lebanon, and now striking at the very ‘head of the snake.’


The latest strikes inside Iran are the culmination of a campaign whose tempo has only increased with time. While many view these events as escalation, the Israeli strategy is far from impulsive. It is built on a history of targeted deterrence stretching back to the 1960s, when Israeli agents tracked down and killed figures responsible for anti-Israel attacks in Europe and beyond.


During the early 2000s, Israel responded to the Second Intifada with a policy of ‘mowing the lawn’ - a metaphor for periodic, tactical military operations meant to degrade but not destroy adversaries like Hamas and Hezbollah.


The October 7 attack changed that calculus. Netanyahu’s government concluded that limited deterrence was no longer viable. Hamas’s incursion was too brutal, too expansive and too deliberate to be seen as anything but a broader Iranian proxy operation. Israel responded by striking not just at the foot soldiers of these ‘resistance’ movements, but reaching upward into their strategic and political leadership - whether in Gaza, Beirut, Damascus or now, Tehran.


The results have been stark. In Gaza, Hamas’s tunnel networks have been systematically collapsed and its command echelons severely weakened. In Lebanon, Israel has launched targeted strikes against Hezbollah commanders, munitions convoys, and military infrastructure. It has repeatedly pushed Hezbollah forces further north of the Litani River, disrupting Tehran’s most capable militia in the Levant.


Syria has been another front in this undeclared war. Israel has carried out hundreds of airstrikes on IRGC facilities and Iranian intelligence posts to erode Iran’s ability to project force westward.


What distinguishes the current campaign is the willingness to escalate openly. Unlike previous Israeli governments, Netanyahu has decided to make Iran pay for its regional misadventures. The strikes on Iran represent not just a bold military gamble, but a strategic vision that seeks to redraw the regional order by dismantling its most dangerous pillar. Regardless of how comprehensively he succeeds, Netanyahu’s actions will undoubtedly shape the Middle East for years to come.

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