Petrol, Diesel Price Hike Imminent? Emkay Sees 'Rs 10/Litre Increase In First Round'

A potential hike in petrol and diesel prices may be on the horizon, with brokerage firm Emkay Global Financial Services warning that continued disruptions linked to the Strait of Hormuz could force the government to act. The brokerage expects a first round of price hikes of around Rs 10 per litre, although it noted this would only partially offset losses faced by oil marketing companies (OMCs).

In a report released on Friday, Emkay said that any prolonged closure or disruption in the Strait of Hormuz, a critical global oil transit route, would tighten supply and keep crude prices elevated, making India's current fuel price freeze increasingly unsustainable.

The pressure stems from persistently high global oil prices, with Brent crude hovering around $100–$120 per barrel, exacerbated by geopolitical tensions affecting flows through the Strait of Hormuz. Since a significant portion of global oil supply passes through this chokepoint, any disruption directly impacts import-dependent economies like India.

As a result, Indian fuel retailers are facing rising under-recoveries, as domestic pump prices have not kept pace with global benchmarks.

Impact On Inflation, GDP And Markets

According to Emkay, a Rs 10/litre increase would cover only about 53% of current under-recoveries, leaving room for further hikes if crude prices remain elevated. However, the brokerage cautioned that a sharper increase could trigger inflationary shocks and broader macroeconomic risks.

It estimates that a Rs 10 hike could have an approximately 75 basis points impact on inflation, including second-order effects. Emkay noted that even a partial price hike would not allow the government to roll back recent excise duty cuts, which have a potential fiscal impact of about 0.2% of GDP.

Meanwhile, equity markets could react negatively in the short term. The brokerage warned that a fuel price hike could trigger a correction, especially as market valuations are already near long-term averages.

Emkay also believes that if crude prices remain high due to continued tensions around the Strait of Hormuz, additional rounds of price hikes may follow, likely in a staggered manner. Despite this, the firm described the current energy shock as “transient”, expecting eventual stabilisation in global markets once supply normalises.

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The report also flagged sectoral risks, noting that automobiles (OEMs, ancillaries, lenders) and cement companies are likely to be among the biggest losers due to higher fuel costs.

Separately, Kotak Institutional Equities had outlined a more severe scenario. In its recent report, the brokerage estimated that fuel prices may need to rise by Rs 25–28 per litre to fully align with global crude prices, assuming an Indian crude basket of $120 per barrel.

However, it added that political considerations, especially around ongoing state elections, have likely kept actual hikes more moderate.

Kotak also highlighted that Indian refiners are facing an incremental monthly burden of around Rs 270 billion, despite modest increases in LPG and aviation turbine fuel (ATF) prices. A Rs 10/litre excise duty cut announced on March 27, 2026, has provided some relief but limited the government's fiscal flexibility.

However, the Ministry of Petroleum and Natural Gas has dismissed reports of an imminent price hike.

In a statement posted on X, the ministry said there is “no such proposal under consideration”, calling such reports “misleading” and aimed at creating panic.

The government also emphasised that India is among the few countries where petrol and diesel prices have remained unchanged for nearly four years, attributing this stability to coordinated efforts between the government and public sector oil companies to shield consumers from global price volatility.

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