Petrol, diesel prices up ₹3/litre as govt balances crude shock, OMC stress and inflation risks

Industry analysts said the latest increase only partially addresses the severe under-recoveries being borne by OMCs.

The government on Friday raised retail prices of petrol and diesel by around ₹3 per litre and increased compressed natural gas (CNG) prices by ₹2 per kg, marking the first significant fuel price revision in over two years, even as it argued that consumers are still being shielded from the full impact of soaring international crude oil prices triggered by the escalating West Asia crisis.

With the latest revision, petrol and diesel prices in the national capital rose to ₹97.77 and ₹90.67 per litre respectively, while CNG prices increased to ₹79.09 per kg.

Defending the move, government sources said a complete pass-through of the global oil shock would have required retail fuel prices to rise by as much as 200-300 per cent of the present increase because of the sharp spike in international crude prices and India’s heavy dependence on imported oil.

According to sources, the state-owned oil marketing companies (OMCs), Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, have limited the increase to around 3.5 per cent on a base price of roughly ₹95 per litre in an attempt to cushion consumers from extreme global volatility.

Absorbing losses

Government officials said OMCs and the Centre have together been absorbing losses of around ₹1,000 crore a day, amounting to more than ₹1 lakh crore per quarter, to keep retail fuel prices largely unchanged despite elevated crude oil prices.

Industry analysts said the latest increase only partially addresses the severe under-recoveries being borne by OMCs.

Prashant Vasisht, Senior Vice-President and Co-Group Head, Corporate Ratings at ICRA, said the ₹3 per litre hike offers only limited relief to oil retailers. “ICRA estimates that at crude prices of $105-110 per barrel and considering past 10-year average crack spreads of auto fuels, OMCs incur a loss of about ₹500 crore daily on the sale of auto fuels and domestic LPG, even after factoring the fuel price hike,” he said, adding that retail prices may need to be revised again if crude prices remain elevated.

Simultaneously, economists warned that the fuel price increase could rekindle inflationary pressures just as retail inflation had begun easing.

Retail inflation, measured by the Consumer Price Index (CPI), stood at 3.5 per cent in April and remained within the Reserve Bank of India’s comfort range. However, wholesale inflation, based on the Wholesale Price Index (WPI), surged to a 42-month high of 8.3 per cent in April, driven largely by higher fuel and power prices.

Economists expect the impact of the latest fuel price revision to start reflecting in the May CPI print, with the full transmission likely from June onwards. Several analysts also indicated that more price hikes may follow if international crude prices remain elevated.

Aastha Gudwani, India Chief Economist at Barclays, said the direct impact of the fuel price increase on CPI inflation could be around 15 basis points once fully passed through.

Published on May 15, 2026