On Thursday, the Indian government dismissed media reports claiming that petrol and diesel prices would rise due to elevated global crude oil costs. A report from Kotak Institutional Equities, referenced in various outlets, indicated that the ongoing pause in fuel price adjustments amid state elections is unsustainable, as oil marketing companies incur significant losses. It projected a potential sharp increase of Rs 25-28 per litre once elections end.
Crude oil prices reached approximately $120 per barrel last week, straining the pricing mechanism. Business Today highlighted the Kotak analysis, noting discrepancies between futures and actual supply, which signal persistent market pressures. Without timely adjustments, the financial strain on fuel retailers could intensify.
The Ministry of Petroleum and Natural Gas stated on X: ‘Certain reports are circulating about increases in petrol and diesel prices. We clarify that no such plan is being considered by the government. These reports aim to incite unnecessary alarm and are deceptive.’
The ministry added: ‘India stands alone in maintaining stable petrol and diesel prices over the past four years. The government and public sector oil firms have consistently worked to shield citizens from sharp rises in global rates.’
Elevated international crude oil prices, driven by Middle East conflicts, are fueling speculation about domestic fuel price adjustments. Tensions between the US and Iran since February 28 have disrupted the Strait of Hormuz, a vital route for 20% of world oil supplies, leading to market fluctuations.
Fuel prices in India have remained steady recently, attributed by experts to the election period, when authorities typically avoid hikes to curb inflation.
The report noted that despite a 13-15% reduction in import volumes, higher crude costs have boosted India’s import expenses by an estimated $190-210 million daily, increasing losses for oil companies due to deferred price changes.
Kotak estimated a monthly burden of around Rs 270 billion from this delay. While measures like a Rs 10 per litre excise duty reduction and taxes on exports have offered partial relief, they have not fully alleviated the pressure on retailers.
With the last election phase set for late April, experts anticipate an announcement of price increases soon. Kotak suggested a necessary adjustment of Rs 25-28 per litre, though any changes would likely occur incrementally to control inflation.
Currently in Delhi, petrol costs Rs 94.77 per litre, and diesel is Rs 87.67 per litre.
