New Delhi: India’s state-run oil retailers have been asked not to increase retail diesel and petrol prices and absorb a part of the losses due to the recent recovery in global crude oil, people with knowledge of the matter said.

Companies, including Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp., will have bear a loss of up to Rs1 per litre on sale of diesel and petrol, the people said asking not to be identified as the matter is private. Shares of Indian Oil fell as much as 7.6% in Mumbai, the most since November 2016 in intraday trading, while HPCL lost as much 8.3%.

Prime Minister Narendra Modi’s administration wants to keep petrol prices under check to shore up popular support ahead of a series assembly elections this year. The South Asian nation, which imports more than 80% of its annual crude oil requirement, wants to see prices at about $50 a barrel in order to manage its finances better, oil minister Dharmendra Pradhan said in an interview.

A cut in excise duty on fuel prices is unlikely due to sluggish revenue collections on the back of a botched rollout of the goods and services tax, the people said. The oil ministry has been asked to prepare subsidy payments at different price points in case of a further run up in oil prices.

HPCL is not aware of any directive from the government to absorb a part of the losses from higher crude prices, the company’s chairman, M. K Surana, said on the sidelines of the International Energy Forum in New Delhi.

While Modi has reaped the benefits of the biggest price crash in a generation since coming to power 2014, oil is recovering as the government gears up for elections in 2019. Since hitting a low of $ 27.1 per barrel in 2016, Brent crude is currently trading around $70 level. Bloomberg

Dhwani Pandya contributed to this story.

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