No Proposal to Raise Diesel, Petrol Prices: Govt

Why It Matters

Keeping fuel prices static shields consumers and curtails inflation risk, but the fiscal burden on PSU oil marketers intensifies as crude costs soar.

Key Takeaways

• Govt denies any plan to raise petrol or diesel prices
• Under‑recoveries cost PSU OMCs about $289 million daily
• Crude basket price jumped from $70 to over $113 per barrel
• Refineries run at high capacity, stocks remain adequate
• Panic buying spikes despite stable retail fuel prices

Pulse Analysis

India’s decision to hold petrol and diesel prices steady amid a sharp rise in global crude costs reflects a delicate balancing act. Since early 2022, the government has absorbed under‑recoveries of roughly ₹20 ($0.24) per litre for petrol and ₹100 ($1.20) per litre for diesel, translating to an estimated $289 million daily hit for state‑run oil marketers. This policy aims to protect consumers from inflationary pressure, especially as the Indian crude basket has leapt from $70 to more than $113 per barrel, a 60% increase that strains the fiscal ledger.

The surge in crude prices has not been offset by a proportional drop in imports; despite a 13‑15% decline in volume, India’s import bill has risen by $190‑210 million each day. Higher import costs, combined with the under‑recovery burden, tighten government finances and pressure public sector enterprises. Yet, refinery utilization remains robust, with plants running near capacity and maintaining sufficient stocks, which helps avert supply shortages and curbs panic buying that has sporadically surfaced at retail outlets.

Market participants watch the fuel price stance closely, as any shift could ripple through inflation expectations and monetary policy. While the government signals no imminent price hike, the sustained volatility in international oil markets leaves room for future adjustments. Analysts suggest that continued fiscal support for PSU oil marketers may be necessary, unless a significant easing in crude prices occurs, to sustain the current price freeze without jeopardizing the sector’s profitability.