Petrol price hike risk in India: ₹18-₹35 after polls

Why fuel price worries are back

India’s retail fuel prices are under renewed scrutiny as global crude swings keep raising the gap between pump rates and input costs. A report by Macquarie Group has flagged that oil marketing companies (OMCs) are absorbing losses even as international crude benchmarks remain elevated. The key concern is timing. Multiple reports cited in the provided material suggest that any meaningful revision in pump prices could be deferred until after state elections in April, including West Bengal and Tamil Nadu.

Crude oil’s sharp moves set the backdrop

The global oil market has stayed volatile since the Russia-Ukraine conflict drove crude above USD 100 per barrel. Prices then dropped to around USD 70 earlier this year, before climbing again to about USD 120 last month amid renewed supply concerns linked to US-Israel actions against Iran. On Tuesday, April 14, prices eased as optimism around potential US-Iran peace negotiations reduced immediate fears of supply disruption.

That day’s benchmark moves reflected the shift in sentiment. Brent crude fell about 1% to $18.40 a barrel, while US crude declined 1.7% to $17.40. Even so, the broader context remains of elevated levels relative to recent domestic retail pricing.

What Macquarie says about OMC losses

Macquarie’s “India Fuel Retail” note estimates that India’s OMCs are incurring marketing losses because pump prices have not moved in line with crude. Reports cited in the material put current losses at around ₹18 per litre on petrol and ₹35 per litre on diesel. The same set of reports also cited daily losses of nearly ₹2,400 crore last month.

Macquarie also quantified how quickly under-recoveries can widen if crude rises further. For every USD 10 per barrel increase in crude oil prices, the loss for oil companies rises by nearly ₹6 per litre, according to the report.

Elections and the timing of any revision

The Macquarie note raised concerns about the likelihood of retail fuel price increases after elections, highlighting the risk of elevated pump prices after state elections in April. A separate report referenced in the material, from Morgan Stanley India, also suggested that any near-term adjustment in pump prices could be deferred until polling concludes in Assam, Kerala, Tamil Nadu and Bengal.

Morgan Stanley added that if elevated crude prices persist for a quarter or more, a partial pass-through to consumers could happen through staggered hikes. This framing matters for households and transport-intensive businesses because it points to gradual revisions rather than a single sharp move, although no firm schedule was cited.

Government actions to cushion under-recoveries

The material notes that despite high crude, state-run OMCs have held pump prices steady. Instead, the Centre has used fiscal and trade measures to limit OMC under-recoveries and manage downstream impacts.

Steps cited include a cut in special additional excise duty on petrol and diesel by ₹10 per litre each. The government also reimposed windfall taxes on exports of ₹21.5 per litre on diesel and ₹29.5 per litre on aviation turbine fuel. In addition, customs duty relief on select petrochemical inputs was granted until June 30, 2026.

Private players move first in some cases

While state-run retailers have maintained stable pump prices in the account provided, private retailers have shown more willingness to adjust. Nayara Energy, described as India’s largest private fuel seller in the material, has already raised petrol and diesel prices by ₹5 and ₹3 per litre, respectively. Such moves are closely watched because they can indicate where market-based pricing would trend if losses are passed through more broadly.

Other segments already seeing increases

Even with core retail petrol and diesel largely unchanged at state-run outlets in the cited reports, other fuel and related product categories have seen price action. The material mentions increases in domestic and commercial LPG, premium petrol, industrial diesel and certain plastics. This suggests that pricing pressure is not limited to transport fuels, especially when crude and refined product costs stay high.

How high is crude in India’s basket?

India’s crude basket crossed $130 per barrel on April 2, according to petroleum ministry data cited in the material. That data point is important because it indicates that the cost environment facing refiners and marketers has been significantly above $100, even if global benchmarks have fluctuated around that level.

Benchmark Brent crude futures for June delivery also rose by over 6% and crossed the $100 per barrel mark, based on the same set of reports. Separately, the material also notes that in Europe, oil prices for delivery touched close to $150 per barrel, nearing record highs.

What brokerages expect if crude stays elevated

Beyond Macquarie and Morgan Stanley, the material cites additional brokerage expectations. Motilal Oswal expects OMCs to hike retail prices by ₹2 to ₹4 per litre towards the end of the first quarter of FY27 if crude remains elevated. Based on revised CPI weights, the brokerage estimates a direct inflation impact of 10 to 20 basis points for such increases.

The material also includes estimates from Kotak Institutional Equities and CRISIL Research on what could be required for fuller pass-through under higher crude assumptions. Kotak Institutional Equities said oil companies “will need to raise diesel prices by ₹13.1 to ₹24.9 per litre and ₹10.6 to ₹22.3 per litre on gasoline (petrol)” at an underlying crude price of USD 100 to 120 per barrel. CRISIL Research said a ₹9 to ₹12 per litre increase would be required for a full pass-through of an average USD 100 per barrel crude oil, and a ₹15 to ₹20 per litre hike if average crude rises to USD 110 to 120.

Key numbers at a glance

Why it matters for markets and consumers

For consumers, the immediate impact has been stable pump prices at state-run retailers, despite the crude surge described in the material. But the same stability raises the risk of deferred adjustments if under-recoveries persist. For investors, the data points around per-litre losses, daily losses and the sensitivity of under-recoveries to crude prices are central to evaluating earnings pressure on OMCs when retail pricing does not reflect higher input costs.

The inflation channel is also in focus. Motilal Oswal’s estimate of a 10 to 20 basis point direct CPI impact for ₹2 to ₹4 per litre hikes shows how even relatively small revisions can feed into headline inflation calculations, especially when fuel costs influence transport and logistics.

Conclusion

The reports paint a consistent picture: crude has been volatile and, at points, elevated enough to create sizeable marketing losses for India’s OMCs, with estimates of ₹18 per litre on petrol and ₹35 per litre on diesel. With state elections in April cited as a key timing factor, the market is watching whether pump price revisions are taken up after polling concludes, while crude trends and fiscal measures continue to shape the near-term path.