OMC losses, rupee slide signal economic trouble in India

During the election campaign until May 4, the government ordered public sector oil marketing companies (OMCs) to sell petroleum products at pre-Iran war prices to hide looming economic trouble, according to a report. This led to OMCs suffering losses of over Rs 1,000 crore per day in April and May, cumulatively Rs 90,000 crore in the first quarter, wiping out their previous year's profits.

The wholesale price index has jumped from 3% last year to over 8%, nearing 9%, which will push up retail prices. The rupee has slid towards 100 to the US dollar, and foreign exchange reserves have dropped by $25 billion. Private investment is stagnant, unemployment has risen towards 5%, and the MSME sector is in distress.

Former Finance Minister P. Chidambaram described the economy as 'scalded' and 'scarred', while the government maintains it is an 'oasis of comfort' on fuel supplies. The report warns that without an energy security strategy focusing on domestic production, the crisis will worsen, as output from Mumbai High has fallen from 47,000 barrels per day to 13,500 bpd.