West Asia Crisis: Government Prepares Energy and Fertilizer Stockpiles
NEW DELHI: The Indian government is better prepared for potential disruptions in energy and fertilizer supplies as tensions rise in West Asia. However, soaring oil prices are expected to negatively impact the rupee, increase deficits, and strain foreign portfolio investments. Elevated freight rates, which are nearly ten times higher than pre-war levels on certain routes, are likely to exacerbate these challenges.
The Drewry World Container Index reported a price of $4,585 for a 40-foot container on October 22, significantly up from $1,746 on October 25, 2025. Ajai Sahay, director general at the Federation of Indian Export Organisations (FIEO), noted that container rates to West Asian ports have surged from $800 to between $8,000 and $10,000. He expressed concern that while buyers have managed to stock up on inventory, it remains uncertain whether they can absorb the increased freight costs.
Security risks in the East-West container freight market continue to disrupt vessel movements through the Gulf. Only two containerships sailed into the Gulf in Week 42, a decline from five the previous week. Meanwhile, sailings through the Suez Canal saw a slight increase, from 54 in Week 41 to 55 in Week 42. The Strait of Hormuz has become a focal point of conflict, raising concerns over the safety of crew and vessels in the region.
Crude oil prices pose a significant challenge, averaging $120 a barrel for Indian refiners in October, the highest monthly average in 12 years. With petrol prices averaging $140 a barrel and diesel over $154, state-run retailers are facing mounting losses linked to import prices. Although the government has provided some relief through duty cuts and allowed price increases, fiscal concessions are limited. Fuel and fertilizer subsidies have already exceeded last year’s levels, and additional support may be necessary.
Despite these pressures, officials indicated that fertilizer companies have taken advantage of lower prices to stock up for the upcoming season. The fertilizer ministry has some surplus funds due to savings. The government has some financial cushion from higher-than-expected disinvestment receipts and dividends from state-run financial institutions and the Reserve Bank of India. Tax collections have remained stable, which is expected to help keep the fiscal deficit within the target of 4.3% of GDP. However, rising import bills due to higher commodity prices will impact the trade and current account deficits, and a weaker rupee may deter foreign investment in Indian stocks.
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