Petrol, diesel prices: Govt holds line as crude hits $126

Crude shock revives the fuel price debate

Crude oil’s jump past $126 a barrel has put India’s retail fuel pricing back in focus, as state-run oil marketing companies (OMCs) report rising under-recoveries on key fuels. According to reporting cited in The Economic Times, OMCs are pressing for higher retail prices after the recent surge in crude and refined product benchmarks. The government, however, has publicly ruled out an immediate increase in petrol and diesel pump prices. The push and pull reflects a familiar trade-off: protecting consumers from a price shock versus limiting losses at fuel retailers and containing fiscal pressures.

What triggered the latest spike in oil

The rally in crude was linked to escalation risks in West Asia, with a specific market trigger cited as US President Donald Trump signalling an extended naval blockade of Iran. The signal, as reported, pointed to prolonged disruption risks around the Strait of Hormuz, a key energy shipping route, tightening the global supply outlook. Brent crude for June delivery rose above $126 a barrel, while July futures were around $114. Before the conflict that began on February 28, Brent was about $13 per barrel.

OMCs seek higher prices as losses mount

People familiar with discussions, as quoted in the report, said OMCs are incurring losses on petrol, diesel, aviation turbine fuel (ATF), and LPG, and want approval to raise retail prices. The report added that sustained losses are not viable and OMCs may seek compensation from the government if retail prices are not increased, as has happened in the past. The initial expectation, according to the same account, was that OMCs could absorb the hit using profits built up during earlier periods when crude was lower and retail prices were elevated. But with no quick end to the Gulf crisis in sight, the report suggested a pump price increase may become harder to avoid.

Government stance: no immediate hike, avoid panic

Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas, reiterated that there is no proposal to raise prices and asked the public not to believe rumours that had led to panic buying in some areas. She said the government’s effort has been to keep prices stable despite sharp moves in international markets. Sharma also stated that the country has sufficient stocks of petrol, diesel, LPG, and ATF to meet demand, and that supplies are being prioritised and monitored to prevent shortages at retail outlets. The Ministry also said on X that “there is no such proposal under consideration by the government” following speculation of a post-election hike.

Selective increases already visible in parts of the market

While regular petrol and diesel prices remain unchanged, OMCs have selectively increased some categories. The report said they raised prices for premium petrol, bulk diesel, and ATF for international flights in line with global trends. ATF for domestic flights has been only partially raised, and LPG prices have increased by just ₹50 per cylinder. Separately, reports also noted premium fuel adjustments in Delhi, including Indian Oil’s XP100 petrol rising by ₹11 to ₹160 per litre and Xtra Green diesel rising from ₹91.49 to ₹92.99 per litre.

Domestic pump prices, freeze period, and the loss math

Retail petrol and diesel prices have remained unchanged for nearly four years, with the freeze described as being in place since early April 2022. In Delhi, petrol was cited at ₹94.77 per litre and diesel at ₹87.67. Sharma said under-recoveries were about ₹20 per litre on petrol and around ₹100 per litre on diesel due to frozen pump prices. Estimates in the report put daily losses for state-run fuel retailers at around ₹2,400 crore.

Global product prices: diesel, petrol, LPG, and ATF

International refined product benchmarks have moved sharply. Average diesel and petrol prices in April were reported to be 119% and 69% higher than in February. LPG prices were said to have increased by over 40%, and ATF prices doubled. This widening gap between international prices and India’s stable pump rates is the core reason OMCs say the current structure is difficult to sustain without either retail price action or government compensation.

Fiscal constraints and inflation risk shape the decision

The report said the government is reluctant to absorb additional losses because LPG and fertiliser subsidies are already high. At the same time, raising retail fuel prices carries a direct inflation risk and could impact economic growth. This is the policy bind behind the government’s public position: keeping household fuel costs steady even as global inputs spike, while managing the knock-on effect on public finances and PSU balance sheets.

Key facts at a glance

Timeline: how the pressure built up

Why this matters for markets and consumers

For consumers, the immediate takeaway is stability: the government has ruled out a near-term hike in regular petrol and diesel, and has asked people to ignore rumours that trigger panic buying. For OMCs, the situation is the opposite. With reported under-recoveries on petrol and diesel and rising losses across ATF and LPG, the financial strain increases as long as global prices remain elevated and retail prices stay frozen. The divergence is already showing up in differentiated pricing, with increases concentrated in premium fuels, bulk diesel, and ATF categories.

Conclusion

Crude above $126 has intensified the tension between global input costs and India’s stable retail fuel prices. OMCs are reported to be seeking price hikes or compensation as losses rise, but the government has stated there is no proposal to increase petrol and diesel prices at this time. The next developments to watch are further official communication on retail pricing and any additional adjustments limited to premium fuels, bulk diesel, ATF, or LPG categories.