Petrol and diesel prices in India could see a sharp increase of Rs 25–28 per litre after the ongoing state elections, as elevated crude oil prices begin to strain the country’s fuel pricing system. According to a note by Kotak Institutional Equities, the current freeze in retail fuel prices is becoming increasingly unsustainable, with oil marketing companies (OMCs) absorbing significant losses.
The key trigger behind the expected price hike is the sustained rise in global crude oil prices, which have remained elevated due to geopolitical tensions in West Asia. Disruptions in the Strait of Hormuz, a critical global oil transit route, have tightened supply conditions, keeping crude prices volatile. Although there was a brief easing during a ceasefire, renewed tensions have again pushed markets into uncertainty.
Kotak highlights that there is now a growing disconnect between crude futures and physical oil markets, indicating persistent supply stress and limited near-term relief. With crude hovering around $120 per barrel, India’s fuel pricing dynamics are under increasing pressure.
Why fuel prices haven’t risen yet
Despite rising global costs, petrol and diesel prices in India have remained unchanged in recent weeks. Analysts attribute this to the ongoing election cycle, where fuel price stability is often maintained to avoid inflationary concerns.
However, this has come at a cost. The surge in crude prices has sharply increased India’s import bill, even as import volumes have declined by 13–15%. Estimates suggest that the country’s crude import bill has risen by $190–210 million per day, significantly impacting the overall energy balance.
For refiners, the burden is even more pronounced. Kotak estimates that the delay in passing on higher costs has led to an incremental impact of around ₹270 billion per month on OMCs. While the government has attempted to provide relief through measures such as a ₹10 per litre excise duty cut and reintroduction of windfall taxes on exports, these steps have only partially offset the pressure.
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What happens after elections
With the final phase of polling scheduled for late April, analysts expect that fuel price revisions could follow soon after the election process concludes. Based on current crude levels, Kotak estimates that petrol and diesel prices may need to rise by ₹25–28 per litre to reflect underlying costs.
That said, a full and immediate hike is unlikely. Instead, the increase may be implemented gradually to balance inflation risks with the need to reduce losses for oil companies.
Current fuel prices remain stable
As of now, fuel prices across major cities remain unchanged. In Delhi, petrol is priced at ₹94.77 per litre and diesel at ₹87.67 per litre, while in Mumbai, petrol is retailing at ₹103.49 per litre and diesel at ₹90.03 per litre. Prices in cities like Bengaluru, Hyderabad, and Kolkata continue to hover above ₹100 per litre for petrol.
What drives fuel prices in India
Fuel prices in India are influenced by multiple factors, including global crude oil prices, the rupee–dollar exchange rate, central and state taxes, and transportation costs. Given India’s heavy reliance on crude imports, any sustained rise in global oil prices directly impacts domestic fuel rates.
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