India's oil marketing companies received a modest ₹3 per litre fuel price hike, which analysts say is insufficient to cover daily losses. According to energy analyst Yogesh Patil from Dolat Capital speaking to ET Now, the recent increase is "a very modest, small price hike" and is unlikely to fully offset the losses being incurred by the state-run fuel retailers. However, he noted that the step would still help reduce the daily financial strain faced by OMCs. As reported by NDTV, Arvind Kumar, Director (Refineries) at Indian Oil Corporation Limited, described it as "a very small rise" while acknowledging there is "a lot of pressure."
As reported by ET Now, Patil calculated that to eliminate losses on petrol and diesel, a further price hike of ₹11 per litre is required. The oil minister had indicated that combined under-recoveries on petrol, diesel, and domestic LPG sales were running at nearly ₹1,000 crore per day. Breaking down these numbers, Patil estimated that domestic LPG losses alone accounted for nearly ₹400 crore daily, with under-recoveries on LPG cylinders standing at roughly ₹670 per cylinder. The remaining ₹600 crore per day effectively reflected losses on petrol and diesel sales, implying around ₹14 per litre kind of loss on petrol and diesel sales. According to NDTV, to totally recoup the losses and reach break-even on their marketing margins, these companies must hike petrol prices by ₹28/litre more, accounting for a gap of 29.5%, while OMCs need ₹32/litre more hike in diesel prices to reach full cost recovery - a 36.5% shortfall.
Following the latest revision, petrol prices now stand at approximately ₹97.77 per litre in Delhi, ₹106.68 in Mumbai, ₹108.70 in Kolkata, and ₹103.67 in Chennai. Diesel prices have also witnessed a similar increase nationwide. Officials stated that the fuel price hike comes amid tensions in West Asia and fluctuations in international crude oil markets. Experts believe the increase may impact transportation costs and the prices of essential commodities in the coming days.
According to Patil, the move has reinforced confidence that the government could gradually return to a more deregulated fuel pricing regime. The analyst noted that the magnitude of this price hike is instilling confidence in investors that the era of deregulated pricing of petrol and diesel may commence. He added that the hike could also ease concerns surrounding the erosion of book value and the rising dependence of OMCs on short-term debt to manage operational losses. As reported by NDTV, the BJP defended the fuel price hike, citing that India recorded the "smallest material increase" among all major economies amid the Iran war. BJP spokesperson Pradeep Bhandari claimed that India is witnessing about a 3.5 per cent hike in fuel prices, less than several countries across the globe, while the closure of the Strait of Hormuz and the prolonged disruption of shipments sent Brent crude soaring above $100 per barrel through much of April and early May.
Patil believes the government is deliberately opting for calibrated price increases rather than passing on the entire burden to consumers in one shot. As reported by ET Now, he explained that diesel price increases tend to have a broader cascading effect on transportation and logistics costs, which eventually feed into retail inflation. "To our understanding, once transporters raise costs, they hardly come back to normal levels. So, any price hike on the diesel side is being approached very cautiously by the government," he added. According to NDTV, Prime Minister Narendra Modi had last week appealed to citizens to reduce the use of petrol and diesel wherever possible and switch to metro services, electric buses and public transport. A cab driver in Delhi told NDTV that the increase in CNG prices will have a direct impact of ₹3,000-₹3,500 per month on his pocket.
