Get ready to pay fatter fuel bills this year.

NEW DELHI: Get ready to pay a fatter fuel bill. Opec powerhouses Saudi Arabia and Iraq, which supply nearly 40% of oil India imports from West Asia, on Thursday initiated steps to bring the world's honeymoon with low oil prices to an end.

Saudi Arabia, the world's largest oil exporter which two years ago sparked the oil price crash with hefty discounts, raised premium on grades of crude shipped to Asia and the US and initiated talks with buyers to cut supplies by 3-7% in February. Simultaneously, news agency reports said Iraq, the second major Opec exporter and currently among India's top-two oil suppliers, has initiated steps to pare output.

Both the developments indicate the November agreement among Opec members and other major oil exporters such as Russia is well on its way to being implemented, proving sceptics wrong.

The target is to cut output by 1.8 million barrel a day, nearly equal to India's daily import of 1.9 million barrels, with a view to sucking out stockpiles and rebalance the market. This certainly is bad news for fuel consumers in a country such as India as the country imports nearly 80% of its oil needs.

Through much of 2015 and 2016, fuel bill shrunk for consumers as oil prices tumbled some 70% from 2014 high of $112 a barrel. Lower oil prices reduced India's import bill and eased subsidy burden on the government giving it legroom to mop up additional money for social sector spending by raising excise on fuels five times.

But the good times appear to be coming to an end. Already, petrol prices were raised thrice and diesel price twice in December as the cost of Indian Basket - the mix of crude bought by India - rose 21% from its November level. The Indian Basket is made up of Dubai-Oman sour grade and global benchmark Brent in 71:29 ratio. Overall, West Asian supplies account for 59% of India's oil imports.

Any upward movement in global crude, combined with the rupee's weakness against the Greenback, invariably accentuates the impact on pump prices. 

International Energy Agency and Opec have projected oil prices to remain in the region of $60 a barrel through 2017 and go higher in 2018-20. If that is so, the government may be forced to reduce excise duty, which it had hiked to deny consumers the full benefit of low prices, to avoid popular anger as it heads for the general elections in 2019.