rime Minister Narendra Modi‘s energy reforms may be facing their toughest test yet. Soon after Modi came to power in May 2014, crude oil prices went into a tailspin. The resultant bonanza helped buffer government finances and led to the decontrol of fuel prices. Now, as the commodity that forms almost a fifth of the nation’s import bill reverses its direction and a long election season looms, one of Modi’s key reforms may be in jeopardy.
That’s bad news for India’s state-run oil marketers. Pump prices in India for gasoline and diesel are near record levels as the government raised taxes on the fuels. A public backlash may leave little room for further increases.

“Crude’s rally may force the Indian government to choose between cutting excise duty on petroleum products or reintroducing fuel-price caps to control inflation,” Kunal Agrawal and Kar Wai Lee, analysts at Bloomberg Intelligence, said in a Jan. 29 note. “Reducing duty would impact state finances, while price caps would dent state refiners’ revenue.”

Already, high fuel prices have become a flash point with the opposition. Modi’s opponents have criticized excise tax increases by the government that have deprived Indians of the benefits of low crude prices.

Signs that all this is leading to a pause in fuel pricing are becoming evident. State refiners and marketers Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. barely revised gasoline prices between Nov. 1 and Dec. 14, when elections in Modi’s home state of Gujarat and the Himalayan state of Himachal Pradesh took place. BJP won both. Diesel prices rose by just about 1 percent during the period, while Brent prices gained 5 percent.

This year, elections are scheduled in eight states, including in three where Modi’s Bharatiya Janata Party is seeking re-election. This will be followed by federal elections in the first half of 2019.