Days after state polls, OMCs raise petrol, diesel prices by ₹3 a litre

New Delhi: Indian oil marketing companies (OMCs) finally bit the bullet and raised prices of petrol and diesel by around ₹3 a litre on Friday. According to two people aware of developments, more price hikes are expected going ahead as the under-recoveries of OMCs are still high.

The latest price hike — the first in four years by the state-run refiners — comes less than three weeks after state assembly elections in Assam, Kerala, Tamil Nadu, and West Bengal concluded on 29 April.

Petrol and diesel are now available at ₹97.77 and ₹90.67 per litre, respectively, in Delhi. In the other key metros of Mumbai, Kolkata and Chennai, petrol prices are ₹106.68, ₹108.74 and ₹103.67. Diesel is now priced at ₹93.14, ₹95.13 and ₹95.25, respectively, in these three cities.

To be sure, private refiners and oil marketing companies such as Nayara and Shell that operate around 8,500 of the more than 100,000 petrol stations in India, had raised fuel prices earlier. In March, Nayara had raised petrol prices by ₹5 per litre and diesel by ₹3 a litre. And on 1 April, Shell raised petrol prices by ₹7.41 per litre and the price of diesel by ₹25 a litre.

Earlier on 27 March, the finance ministry had reduced the excise duty on petrol and diesel by ₹10 per litre to avert an immediate price hike.

Queries emailed to the Union ministry of petroleum and natural gas on Friday afternoon were not immediately answered.

Immediate fallout

The increase in fuel prices has raised concerns across multiple industries, including agriculture and telecom, among others.

Diesel remains the backbone of India’s agriculture economy — which consumes about two-fifths of annual diesel demand of 92 million tonnes — powering tractors, harvesters, irrigation pumps and transportation vehicles. Any increase in fuel prices typically translates into higher cultivation, irrigation and transportation costs.

Ahead of the crucial kharif sowing season, the impact of higher diesel prices could push up input costs as well as food inflation in the coming months.

“This is a setback for the farming community as diesel is a critical input in agriculture,” said Puneet Singh, a farmer from Ambala in Haryana. “Any rise in diesel prices immediately increases operational costs for farmers because almost every farm activity today depends on diesel-run machinery.”

On the telecom front, the diesel price hike is expected to increase operating costs for tower companies, which rely on diesel-powered generators as backup power sources at telecom sites, especially in areas with unreliable grid electricity. These fuel and power costs are typically passed on to telecom operators by tower companies that buy diesel at retail prices.

“Our reliance on diesel is not a choice, but a compulsion driven by the lack of 24/7 grid power availability at tower sites,” Manoj Kumar Singh, director general of the Digital Infrastructure Providers Association (DIPA), told Mint.

“The cost has to be absorbed somewhere; it will either degrade the financial health of the operators or ultimately be passed on to consumers through tariff hikes,” he said.

In a note dated 6 April, brokerage IIFL Capital said energy costs account for 10% of India's mobile revenue and 6% of Bharti Airtel’s India revenue and 12% of Vodafone Idea’s revenue.

Why prices were raised

The government had until now maintained that Indian consumers had been shielded from the surge in global oil prices following the West Asia war, even as retail fuel prices rose in neighbouring countries such as Pakistan, Nepal and Sri Lanka.

Petrol and diesel prices in India had remained unchanged since March 2024, when rates were cut by ₹2 per litre ahead of the Lok Sabha elections. Although fuel prices are officially deregulated, daily revisions by oil marketing companies are rare given the political sensitivity around retail fuel prices.

In its April monthly economic review, the department of economic affairs under the finance ministry said passing on higher global energy prices to consumers was “inevitable” during a period of supply disruption, as higher prices help moderate demand.

According to Bank of Baroda estimates, every $1-per-barrel increase in crude prices raises India’s annual import bill by around ₹16,000 crore. India’s oil import bill stood at $121.8 billion in FY26.

Oil prices increased on Friday amid no clarity over a peace deal between Iran and the US and the continuing blockade of the Strait of Hormuz. At 8.13 PM India time, the July contract of Brent on the Intercontinental Exchange was trading at $108.61, higher by 2.73% from its previous close. In the week ending May 15, it increased around 6%.

Limited relief for OMCs

According to the government, the public sector OMCs—Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd—have been losing around ₹20 per litre on the sale petrol and around ₹100 per litre on diesel sales due to high oil prices and unchanged retail prices in India. According to other estimates, the under-recovery on diesel sales, is however, much less.

Prashant Vasisht, senior vice president and co-group head, Corporate Ratings, Icra, said, “The modest hike in retail price of ₹3/litre for petrol and diesel provides limited relief to the oil marketing companies.”

Icra estimates that with crude oil prices hovering around $105-110 per barrel and based on the average crack spreads of the past decade, oil marketing companies are losing approximately ₹500 crore every day on auto fuel and domestic LPG sales, even after the recent fuel price increase is taken into account. If crude prices remain high for long, these companies may have to raise prices again, Vasisht said.

According to Sehul Bhatt, director, Crisil Intelligence, the price hike is a step toward unwinding one of the more prolonged under-recovery cycles in recent memory.

“At their peak, oil marketing companies were absorbing losses of ₹23-30 per litre on petrol and diesel, translating to a combined daily loss of ₹1,300-1,400 crore across petrol, diesel, and LPG. The ₹3 hike, alongside a marginal softening in crude prices, brings estimated residual under-recoveries down to ₹10 and ₹13 per litre, offering OMCs a degree of operational breathing room,” Bhatt said.

On 8 May, Sujata Sharma, joint secretary in the ministry of petroleum and natural gas, had said that OMCs are incurring losses of around ₹30,000 crore per month on the sale of petrol, diesel and LPG amid high crude prices.

Vijay C. Roy and Jatin Grover contributed to this story.