Petrol prices rise 3rd time in May 2026; VAT focus

What changed on May 23

Petrol and diesel prices were raised again on Saturday, marking the third hike in May. State-run oil marketing companies increased petrol by 87 paise per litre and diesel by 91 paise per litre, according to industry sources cited in reports. In Delhi, petrol is now priced at Rs 99.51 a litre and diesel at Rs 92.49 per litre after the latest revision.

The Centre said the cumulative increase has been kept to under Rs 5 per litre even as global crude prices rose sharply. It linked the latest retail revisions to the rally in oil prices triggered by the ongoing Iran war, which began on February 28.

Three hikes in May: the sequence

The price increase on May 23 follows two earlier revisions in the same month. The first hike was announced on May 15, when retail fuel prices were raised by Rs 3 per litre. A second increase was reported earlier in the week, with petrol up 87 paise per litre and diesel up 91 paise per litre.

Government data cited in the reports said prices moved in three phases on May 15, 19 and 23. Across these three changes, the cumulative rise was reported at around Rs 4.74 to Rs 4.82 per litre, and described elsewhere as “nearly Rs 5 per litre” in less than 10 days.

Timeline of May 2026 fuel price revisions

Centre’s explanation: 76-day cushion and “under Rs 5” rise

In a notification issued on Saturday, the Centre said India had absorbed the impact of rising global oil prices for 76 days after the outbreak of the US-Iran conflict. It added that the cumulative increase had been limited to under Rs 5 per litre, calling this revision the lowest “anywhere in the world,” as per the notification.

The same set of statements framed the May hikes as a delayed pass-through after a period of price restraint. The Centre also described India as the “only major economy” that reduced or tightly controlled retail fuel prices during both global energy crises, while alleging that Opposition-ruled states continued to collect higher taxes on petroleum products.

Why prices differ across states: excise versus VAT

The Centre attributed the state-to-state divergence in pump prices mainly to Value Added Tax (VAT) and other levies imposed by state governments. It said the central excise component of petrol and diesel prices is the same in every state, and that the divergence is driven by the VAT each state levies.

The notification explained that states with the highest VAT impose effective rates of 30% and more, and these are sometimes layered with per-litre additions and infrastructure cesses. In contrast, states with lower VAT impose rates closer to 20%, without per-litre additions and without additional cesses, according to the Centre.

States highlighted by the Centre: prices above Rs 112

After the latest revisions, the Centre said petrol in three states - Andhra Pradesh, Telangana, and Kerala - cost over Rs 112 per litre. It stated that Telangana and Kerala are governed by parties of the INDIA bloc.

The Centre also detailed the tax structure in these states. It said Andhra Pradesh charges 31% VAT plus four rupees a litre plus a road development cess, taking the effective rate close to 35%. It added that Telangana takes petrol close to Rs 116. For Kerala, it said the state adds a social security cess on top of its base VAT.

BJP-ruled states cited at or below Rs 102 per litre

The Centre drew a contrast with six BJP-ruled states - Gujarat, Uttar Pradesh, Delhi, Haryana, Goa, and Assam - stating that these states have priced petrol at or below Rs 102 per litre.

It argued that while Opposition leaderships ask the central government to cut excise duty, they have not cut VAT at the state level. This claim was used to explain why consumers in higher-VAT states pay more for the same litre of fuel.

The March 27, 2026 excise cut and the political argument

The notification referred to an excise duty cut on March 27, 2026, stating that the central excise duty was reduced by Rs 10 per litre on petrol and diesel. It said BJP-ruled states passed the full cut through to the pump.

It added that Congress-ruled and INDIA-bloc states did not separately reduce VAT, which, according to the Centre, meant consumers in those states continued to pay more because of state taxation. The Centre summed up its argument by saying the “framing that the central government overtaxes fuel collapses against the state-level data.”

Metro-level pricing: Delhi versus other cities

Separate reports, citing Indian Oil Corporation’s latest fuel price data, noted that Mumbai, Chennai and Kolkata continue to record higher fuel prices compared to Delhi. The same reports said fuel prices vary across states because of differences in local VAT rates and other levies imposed by state governments.

This metro divergence aligns with the Centre’s broader claim that retail prices are shaped by state taxes even when central excise is uniform.

Key facts at a glance

Market impact: what the May hikes mean for consumers

For consumers, the immediate impact is a higher per-litre cost at the pump, with the latest revision pushing Delhi petrol to Rs 99.51 and diesel to Rs 92.49. The government’s own framing focuses on two drivers: international crude movements linked to the West Asia conflict, and the role of state-level VAT in widening retail price differences.

The Centre’s statements also place attention on how tax structure, not just crude prices, determines the final bill for motorists. In states where VAT is described as 30% and above, and where per-litre additions and cesses are applied, retail prices can stay above Rs 112 per litre even when central excise is uniform.

Analysis: why the VAT debate is back

The May revisions have revived a familiar policy debate around the split of fuel taxation between the Centre and states. The Centre is positioning excise as uniform and pointing to VAT differences as the main reason retail prices vary widely across India.

At the same time, the notification uses the March 27, 2026 excise cut to argue that consumers benefited more in states that did not keep VAT unchanged. With fuel hikes coming in quick succession across May, the tax pass-through issue has moved from an abstract fiscal discussion to a visible difference on price boards across states.

Conclusion

Petrol and diesel prices have now risen three times in May, with the latest increase adding 87 paise to petrol and 91 paise to diesel and taking Delhi to Rs 99.51 and Rs 92.49 per litre respectively. The Centre is attributing the sharp state-wise divergence in prices to VAT and additional levies, while citing a 76-day period of absorbing global oil price impact and a cumulative hike of under Rs 5 per litre.

With crude volatility tied to the continuing West Asia conflict and the Centre publicly pushing state-level VAT comparisons, the next policy signals to watch will be any further changes in central excise or state VAT decisions.