New Delhi: India’s latest fuel price increase is expected to raise cultivation and transportation costs across the farm sector ahead of the crucial kharif sowing season, potentially adding fresh pressure on food inflation in the coming months, according to farmers, economists and agriculture experts.
Oil marketing companies on Friday raised petrol and diesel prices by ₹3 per litre as a surge in global crude oil prices was hurting their margins. Following the hike, diesel prices in New Delhi rose to ₹90.67 a litre, while rates in Kolkata and Chennai increased to ₹95.13 and ₹95.25, respectively.
The development assumes significance as the agriculture sector accounts for nearly two-fifths of India’s annual diesel consumption of around 92 million tonnes. Diesel powers tractors, harvesters, irrigation pumps and transport vehicles used extensively in rural India, making fuel prices a key determinant of farm input costs.
The hike also comes at a crucial time for the sector, with preparations underway for kharif sowing in several states ahead of the southwest monsoon next month. Farmers are expected to begin planting crops such as paddy, oilseeds, soybean, cotton, maize and pulses. Kharif crops account for 47.4% of India’s total foodgrain production of 357.7 million tonnes in 2024-25.
“This is a setback for the farming community as diesel is a critical input in agriculture. Any rise in diesel prices immediately increases operational costs for farmers because almost every farm activity today depends on diesel-run machinery,” said Puneet Singh, a farmer from Ambala district in Haryana.
Diesel accounts for 20-25% of the total cultivation cost, including harvesting and transportation from the field to the home. The development could particularly hurt small and marginal farmers, who comprise 85% of India’s farming community, according to farmer organisations.
"The rising input costs may dilute the benefit of higher support prices for major crops," said Ranbir Singh, a sugarcane farmer and president of the Saharanpur-based Kisan Nyay Morcha, a farmers' group. “We are already grappling with many issues. The fuel increase has come at a time when the requirement of diesel is huge.”
Agriculture and allied activities contribute 15.6% to India’s national income, accounting for 46.1% of the country’s workforce.
An email query sent to the agriculture ministry remained unanswered till press time.
Agriculture experts said higher diesel prices would ripple across the supply chain, increasing the cost of transporting seeds, fertilisers and pesticides from factories to rural markets. Economists said higher logistics costs could contribute to inflation in vegetables, cereals, milk and fruits, particularly if the monsoon remains uneven.
“Diesel prices directly affect the cost of farming, including ploughing, irrigation and transporting produce to mandis. So, any increase in diesel prices will impact the food prices and inflation is likely to head north," said Vijay Sardana, a farm economist and Supreme Court lawyer.
The fuel price increase may also add pressure on the government’s efforts to contain food inflation, which has remained a concern in recent months due to fluctuations in prices of vegetables, pulses and edible oils.
“As fuel is deeply linked to transportation, agriculture and logistics, a rise in diesel prices will also have an impact on inflation in India. Any sustained increase in diesel costs eventually gets transmitted into higher food prices, freight rates and manufacturing costs, putting upward pressure on overall retail inflation,” said Dr. Dharmveer, assistant professor, department of economics, Delhi School of Economics.
India’s retail inflation stood at 3.48% in April as prices of food and beverages, clothing, housing and utilities hardened amid rising energy costs linked to the West Asia war, according to provisional data released by the ministry of statistics and programme implementation on 12 April. The retail inflation was 3.4% in March.