The world’s third-largest oil importer announced increased fuel prices and austerity measures due to the energy crisis.

India has raised fuel prices by about 3 percent as the energy crisis driven by the Iran war and closure of the Strait of Hormuz starts to bite on the economy.

The government in New Delhi announced the 3 rupees ($0.03) per litre price hike on Friday, as it moved to offset losses triggered by the shortage of supply. Gasoline prices rose to 97.77 rupees ($1.02) a litre, while diesel climbed to 90.67 rupees ($0.94).

India is the world’s third-largest oil importer, with 90 percent of the oil it consumes coming from overseas, and about half of its usual crude supplies transiting the Strait of Hormuz.

This has seen the country heavily impacted by rising energy prices and supply disruptions from the US-Israel war on Iran.

However, New Delhi had been avoiding hiking retail fuel prices, making it one of the last major economies to pass higher crude prices on to consumers.

Fuel-saving as an ‘act of patriotism’

The increases come days after Prime Minister Narendra Modi urged Indians to adopt voluntary austerity measures, calling on them to work from home whenever possible, limit travelling abroad, and reduce purchases of gold.

Modi described saving fuel as an act of “patriotism” and encouraged greater use of public transport, carpooling, and lower fertiliser consumption.

Opposition leaders noted that Modi’s appeal came after the conclusion of a key round of state elections and that fuel prices were kept unchanged during the campaign. The polls ended this month, with Modi’s BJP winning two of four states and expanding its influence.

Manoj Kumar, a 48-year-old taxi driver in New Delhi, told The Associated Press news agency that the rise in fuel prices would put extra strain on working-class people.

“For common people like us, even one rupee has great value. People work so hard from morning till evening just to make ends meet. The government is not seeing this,” he said.

The Indian capital became the first state in the country to roll out austerity measures on Thursday. Authorities in New Delhi announced fuel-saving measures, including mandatory work-from-home days for certain government employees.

The state’s Chief Minister Rekha Gupta said the 90-day campaign aims to reduce official fuel use and encourage people in the capital to rely more on public transport.

Employees whose work can be done remotely will have to work from home two days a week, while private companies are being encouraged to adopt similar measures.

India has also accelerated blending ethanol into gasoline as part of its push to cut crude oil imports. Many fuel stations across the country now sell gasoline blended with 20 percent ethanol, and the government has proposed expanding the use of fuels containing 85 percent – or even 100 percent – ethanol in compatible vehicles.

Energy experts said blending biofuel can help mitigate global energy volatility, but could lead to worsening environmental issues by encroaching on land meant for food crops, and potentially harming older vehicles’ engines.

Amid the supply issues, India announced on Friday that it has signed pacts with the ⁠United Arab Emirates (UAE) on oil and gas, as well as strategic defence ‌cooperation.

The deals were signed as Modi began a five-nation tour that will also take him to Europe, and which will “focus on strengthening our energy security”, India’s Ministry of External Affairs said.

Meanwhile, the ⁠UAE government’s media office announced plans to accelerate construction ⁠of a new ⁠oil pipeline that will expand its ⁠ability to ⁠bypass the Strait of Hormuz, with an opening now expected in 2027.