International crude prices have climbed above $100 per barrel following disruptions around the Strait of Hormuz, a critical route that accounts for about 40% of India’s crude imports, after military strikes by the United States and Israel on Iran late last month.

Oil Minister Hardeep Singh Puri said the government had absorbed a significant fiscal burden to offset losses incurred by oil marketing companies, estimating under-recoveries of about 24 rupees per litre on petrol and 30 rupees per litre on diesel at current global prices.

Economist Madhavi Arora of Emkay Global estimated the annualised fiscal impact of the duty cuts at around 1.55 trillion rupees, noting that the measures would cover roughly 30% to 40% of annual losses faced by fuel retailers.India’s benchmark 10-year government bond yield rose 7 basis points to 6.95%, its highest level in 20 months, reflecting concerns over increased borrowing and fiscal strain

.Shares of state-run refiners, including Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited, rose more than 4% at the open before trimming gains later in the session.

Although India formally deregulated fuel pricing, state-owned oil marketing companies which dominate about 90% of the retail market often delay passing on higher crude costs to consumers during periods of volatility.

The latest measures highlight the government’s reliance on tax adjustments and export levies to manage domestic fuel prices and inflationary pressures during global energy shocks.

New Delhi (Reuters) – India’s Hindustan Petroleum Corp Ltd (HPCL) (HPCL.NS) hopes to operate its 15 million metric tonnes per year (tpy) Vizag refinery at full capacity early next year after commissioning some new secondary units geared to upgrade fuels, its head of refineries said on Thursday.

In March, the state-controlled refiner raised the crude processing capacity of the Vizag plant, located in Southern India, from 8.33 million tonnes per year by replacing an old unit with a new 9-million-tonnes-per-year crude unit in March, S. Bharathan told reporters at an event.

Refinery operations at full scale will increase HPCL’s crude imports and enable it to process fuel oil to produce expensive refined products such as gasoline and gasoil, helping boost the company’s profit margin.

In two months, HPCL will commission a 3.5 million tpy hydrocracker, a sulphur recovery unit, and a hydrogen unit, said Bharathan. A residue hydrocracker of similar capacity will also be commissioned by the end of this year, he added.

The two hydrocrackers will upgrade heavier feeds such as vacuum gasoil and bitumen into value-added fuels such as jet fuel, gasoline, and diesel.

The residue hydrocracker will enable the processing of about 1 million tpy of fuel, he said, adding the fuel oil imports could begin from the middle of 2024 “depending on economics”.

When asked about crude sources for its expanded capacity, he said, “Middle East, West Africa and the U.S. are major sources, and Russia now.”

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He said HPCL will be the first Indian refiner to start an electrolyser with a capacity of 370 tpy in two months. The electrolyser will help produce green hydrogen for the Vizag refinery.

HPCL also operates a 9.8 million tpy refinery in Mumbai in the western Indian state of Maharashtra.