West Asia crisis: Government ready with energy, fertiliser stocks

Being better prepared means India has stored enough energy-related supplies and fertilisers to manage an initial disruption. This matters because conflict around major shipping and energy routes can delay imports and raise prices. Stockpiles provide time for officials and companies to respond.

Fertiliser companies bought supplies during a period when prices were falling. The fertiliser ministry also had surplus cash from those savings. These steps mean the next farming season may begin with more supplies available, reducing the need for urgent, expensive purchases.

The cushion is limited. Crude oil prices can still raise fuel costs, subsidies and India’s import bill. The government has some support from disinvestment receipts, dividends and tax collections, but it has limited room for new fiscal concessions. Prepared stocks soften the first shock; they do not remove the wider economic risks.

Container freight has become far more expensive because ships face security risks, insurance costs and difficulty entering affected waters. Higher freight raises the cost of moving goods, squeezes exporters and can spread through the entire supply chain. Container shortages and port congestion can add further delays.

The Drewry World Container Index stood at $4,585 for a 40-feet container on October 22, compared with $1,746 on October 25, 2025. Ajai Sahay said rates to West Asian ports had climbed from $800 to between $8,000 and $10,000. That is roughly ten to twelve times higher on those routes.

The market remains unstable. Only two containerships entered the Gulf in Week 42, down from five in Week 41. Sailings through the Suez Canal rose slightly, from 54 to 55. Businesses may struggle to absorb another increase after rebuilding inventories.

The Strait of Hormuz matters because it is a major passage connected to Gulf shipping and global energy supplies. When conflict threatens that route, shipowners face greater danger, delays and uncertainty. Businesses then pay more to move goods, while some vessels and crews avoid the area.

The article reports continuing attacks and security risks affecting vessel movements through the Gulf. Finding ships and crew willing to enter the Strait is often difficult. Insurance premiums also rise in a more dangerous environment. These costs feed directly into freight prices, while fewer sailings reduce available shipping capacity.

The disruption is already visible in traffic data. Only two containerships sailed into the Gulf in Week 42, compared with five the previous week. Suez Canal sailings increased slightly from 54 to 55. Any further conflict could intensify congestion, container shortages and delays across global supply chains.

A sharp oil-price rise makes India’s fuel system and external finances more expensive. State-run retailers face losses when pump prices do not fully reflect higher import costs. The government may then need to offer duty cuts, subsidies or other support, while paying more for imported crude and products.

In October, crude averaged $120 a barrel for Indian refiners. Petrol averaged $140 and diesel exceeded $154. Because pump prices are linked to import prices, state-run retailers came under pressure. Fuel and fertiliser subsidies were already above last year’s level, leaving the Centre limited room for further concessions.

Higher commodity prices enlarge the import bill and can widen the trade and current account deficits. A weaker rupee makes imports costlier and can reduce the appeal of Indian stocks to foreign funds. The fiscal deficit may remain within the 4.3% target, but a larger shock would test that cushion.

If Gulf or Suez shipping is disrupted, businesses can try to keep goods moving through different routes or modes. The goal is to avoid the most dangerous passage, preserve supply continuity and reduce dependence on a single corridor. These options are substitutes, not cost-free solutions.

Ships may be rerouted around the Cape of Good Hope, while some cargo can move through road or rail corridors where borders and infrastructure allow. Time-sensitive, high-value goods may use air freight. Such choices generally involve longer journeys, higher fuel use, limited capacity or higher prices. The article itself does not specify alternative routes or transport methods.

The immediate evidence points to a strained system. Container shortages and port congestion are already affecting the eastern hemisphere and parts of the world. Only two containerships entered the Gulf in Week 42. Wider disruption could force more rerouting and make delivery costs harder for buyers to absorb.

Each group feels the crisis through a different channel. The government must protect fuel supplies, support retailers and possibly increase fuel or fertiliser subsidies. State-run oil companies absorb losses when import-linked costs rise faster than pump prices. Fertiliser companies, by contrast, benefited from buying during a lower-price window.

The Centre has limited room for fresh fiscal concessions because subsidies are already above last year’s level. It does have some cushion from higher-than-budgeted disinvestment receipts, dividends from state-run financial institutions and the RBI, and steady tax collections. Fertiliser companies’ earlier purchases also helped the next season’s position.

Foreign investors face a different risk. A higher import bill can widen India’s external deficits, while a weaker rupee makes Indian stocks less attractive to foreign funds. The article expects the fiscal deficit to stay within the 4.3% target for now, but higher oil prices could strain every group further.

The fiscal deficit is the gap between government spending and its receipts over a period. The current account deficit is the gap when payments for imports and other external transactions exceed earnings from exports and related inflows. Both matter because persistent gaps increase financial pressure on the government or the wider economy.

Higher oil and commodity prices directly raise India’s import bill. The government may also need to spend more on fuel and fertiliser subsidies or support state-run retailers. That can enlarge the fiscal deficit. At the same time, costlier imports can make the trade deficit wider, contributing to a larger current account deficit.

The article says higher-than-budgeted disinvestment receipts, dividends and steady tax collections provide some fiscal cushion. Officials expect the fiscal deficit to remain within the 4.3% of GDP target for now. However, a weaker rupee raises import costs further and may reduce foreign investment interest, adding to external pressure.