- Government denies reports of imminent petrol and diesel price hikes despite rising crude costs
- Kotak report warns fuel prices may rise Rs 25-28 per litre after elections due to OMC losses
- Government relief measures have eased but not eliminated financial pressure on oil companies
The government on Thursday denied news reports suggesting a price hike in petrol and diesel due to higher international crude oil prices. A research report by Kotak Institutional Equities, widely quoted in media, mentioned that the current freeze in fuel prices due to ongoing elections in different states is not sustainable as oil marketing companies (OMCs) are facing heavy losses. Fuel costs in India may rise sharply by Rs 25–28 per litre after the elections conclude.
Last week, crude oil prices hovered around $120 per barrel, putting pressure on the pricing system. Business Today cited the Kotak report to underline the gap between crude futures and actual oil supply, showing continued supply stress. If prices are not revised soon, the financial burden on fuel companies could increase further, it said.
"There are some news reports suggesting a price hike of petrol and diesel. It is hereby clarified that there is no such proposal under consideration by the Government. Such news items are designed to create fear and panic amongst the citizens and are mischievous and misleading," the Ministry of Petroleum and Natural Gas said in a post on X.
"India is the only country where petrol and diesel prices haven't increased in the last 4 years. Govt of India and Oil PSUs have taken relentless steps in order to insulate the Indian citizens from steep increases in international prices," it addeds.
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Higher Import Bill
Rising global crude oil prices amid tensions in the Middle East is the key trigger for a looming hike in petrol and diesel prices. The ongoing tensions between the United States and Iran since Feb. 28 have resulted in disruptions in the critical sea route Strait of Hormuz, responsible for 20% of global oil flow. This has resulted in price volatility.
Despite these developments, petrol and diesel prices in India have stayed unchanged in recent weeks. According to analysts, this is largely due to the ongoing election season, as governments often skip fuel price hikes during this period to avoid inflationary concerns.
According to the report, the rising crude oil prices have increased India's import bill despite a 13–15% drop in import volumes. Estimates showed the country is spending an extra $190–$210 million per day on crude, putting pressure on OMCs as losses rise due to delay in price revision.
The Kotak report said this delay has added a burden of about Rs 270 billion per month. While the government has implemented steps such as Rs 10 per litre excise duty cut and windfall taxes on exports have provided some relief, they have not fully reduced the financial strain on fuel companies.
With the final phase of polling in late April, analysts say a fuel price hike will likely be announced soon. Kotak estimated that petrol and diesel may need a Rs 25–28 per litre hike based on current levels.
However, any rise in prices is expected to be implemented gradually to manage inflation.
In Delhi, petrol is priced today at Rs 94.77 per litre, while diesel is Rs 87.67 a litre.
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