The oil minister is grasping at desperate measures to cut the country's oil costs by nearly $20 billion after the rupee's slide to record lows has left India facing an oil bill potentially 50 percent higher than on May 1.
Oil Minister M Veerappa Moily has suggested pricking the ballooning oil bill with everything from a street theatre campaign encouraging lower fuel use, to shutting fuel stations, to increasing imports from Iran.
India's crude import bill was $144 billion last fiscal year -- the largest part of its overall import costs. India, Asia's third-largest economy, imports about 80 percent of its oil, which accounts for about 30 percent of its energy needs.
That has hit India hard over the last four months as the rupee fell 20 per cent to record lows near 70 to the dollar.
The economy is struggling with decade-low growth, a record current account deficit and a steep fiscal shortfall.
International oil prices have gained about 15 per cent over the same period. In rupee terms, the Brent oil benchmark has gained nearly 50 per cent since May 1, when faith in emerging market growth began to falter just as the US Federal Reserve started signalling it might wind down its monetary stimulus.
Economist have long pointed to India's fuel subsidies as an area where it could save money, but raising retail oil prices is a political problem when few of the nation's consumers have ever paid market rates for the fuels they use.
And elections are coming up by May 2014.
"Subsidies are something they can do something about and that is clearly something that they should address . . . but you get into this whole issue about elections and public anger," said Praveen Kumar, who leads the South Asia oil and gas research team at FGE in Singapore.
"People are angry with all that's happening with the economy and the rupee crashing. I don't see this situation can continue for too long," he said.
One step that could save $4.3 billion in oil costs, according to Reuters calculations, would be a hike of around 5 rupees per litre, or about 10 percent, in diesel prices.
An oil ministry source has suggested such an increase might come after September 6, when the current parliament session ends.
"The rupee depreciation has left us with no alternative but to pass on costs to customers," said an Indian oil company official, although noting that demand has edged lower with the higher oil prices and slower economic growth.
State-owned retailers sell diesel at subsidised prices that are currently about 10 rupees per litre below estimated true market levels.
However, total subsidies for LPG, kerosene and diesel amount to about $25 billion a year, according to FGE's Kumar, and "there's no way they can dismantle that over night."
India consumed about 1.4 million barrels per day (bpd) of diesel in 2012/2013, making up over 40 percent of the country's total fuel demand.
Nearly half of Moily's targeted savings -- $8.5 billion --