Fuel prices often rise quietly, a few rupees at a time, absorbed into daily life with little ceremony. This time, they have not moved at all. And that stillness is telling its own story. Behind the unchanged numbers at petrol pumps, state-run oil companies are absorbing losses that are now large enough to draw public acknowledgment from the government.
Officials say those losses amount to roughly ₹20 per litre on petrol and close to ₹100 per litre on diesel. The figures are not exact and change with global markets, but they offer a rare glimpse into the gap between what fuel costs and what consumers pay. The government has made clear, at least for now, that it intends to keep that gap in place rather than pass it on to drivers.
The decision comes at a moment when crude oil prices have climbed sharply, driven by tensions in West Asia and disruptions to supply routes. Yet retail prices in India have remained unchanged since April 2022. That gap between global cost and domestic price is where the strain now sits.
Frozen prices, rising costs
The arithmetic is straightforward, even if the politics are not. India imports the vast majority of its crude oil, making domestic fuel prices closely tied to international markets. When global prices rise, the cost of refining and selling fuel increases. If retail prices remain fixed, the difference has to be absorbed somewhere.
In this case, it is being absorbed by state-owned oil marketing companies. These firms buy crude at market rates, refine it, and sell petrol and diesel at prices that are set with government oversight. When those selling prices do not keep pace with costs, the companies incur what officials refer to as under-recoveries.
According to the Ministry of Petroleum and Natural Gas, those under-recoveries are currently steep. The estimate of ₹20 per litre on petrol and ₹100 per litre on diesel reflects recent movements in crude prices, which have climbed from around $70 per barrel last year to well above $100 in recent weeks.
The increase has not been smooth. Prices have moved up and down over the past four years, giving oil companies periods of profit when crude was cheaper and losses when it was not. Officials point out that earlier gains helped offset current losses. That balancing act has allowed retail prices to remain stable even as input costs changed.
Still, the present situation stands out because of the size of the gap. Diesel, in particular, shows a much larger shortfall than petrol. That difference is partly due to pricing structures and taxes, but it also reflects the heavier use of diesel in transport and industry, where demand remains high.
At a recent briefing, senior officials acknowledged the strain but stressed that stability for consumers has been the priority. The government has not raised pump prices despite the rise in crude, and it has taken steps such as reducing excise duties to limit the burden on households.
This approach has a clear aim. Fuel prices affect not only individual spending but also the cost of transporting goods. When diesel prices rise, the effect moves quickly through supply chains, influencing the price of food, construction materials, and other essentials. Holding prices steady can help contain that ripple.
There is also a political dimension. Fuel prices are among the most visible economic indicators for the public. Changes are immediate and widely felt, making them a sensitive issue for any government. The decision to keep prices unchanged, even at the cost of losses for oil companies, reflects that sensitivity.
The cost of holding the line
Keeping prices steady does not remove the cost. It shifts it. In this case, the burden sits with state-run oil firms, which must manage the gap between purchase cost and selling price. Over time, sustained under-recoveries can affect their financial health, limiting their ability to invest or maintain margins.
The government has tools to address this. In the past, it has compensated oil companies through subsidies, bonds, or adjustments in taxes. For now, officials have not indicated any immediate move to raise prices or provide direct compensation, suggesting that the current approach will continue in the near term.
Tax policy has played a role in managing the situation. A recent reduction in fuel taxes helped ease pressure on retail prices, while a levy on fuel exports was introduced to encourage refiners to prioritise domestic supply. These measures do not eliminate the gap but can influence how it is distributed.
The broader context is shaped by events outside India’s control. Tensions in West Asia have disrupted supply routes and pushed up crude prices. The Strait of Hormuz, a narrow passage that carries a large share of the world’s oil, has been at the centre of that disruption. When shipments slow or face risk, prices respond quickly.
India’s dependence on imported oil makes it especially exposed to such shifts. Around 88 per cent of its crude requirement comes from abroad. This reliance means that domestic policy can soften the impact but cannot fully isolate the country from global trends.
The government has pointed to this dependence in explaining its approach. By keeping retail prices stable, it seeks to shield consumers from volatility in international markets. The trade-off is that oil companies bear the immediate cost.
There has also been an effort to counter speculation about future price increases. Reports suggesting a sharp rise in fuel prices after state elections were dismissed by the government as misleading. Officials have stated that no such proposal is under consideration, reinforcing the message that stability will continue for now.
That assurance, however, does not resolve the underlying tension. The longer the gap between global prices and domestic rates persists, the larger the cumulative cost becomes. Whether that cost is absorbed by companies, offset by policy changes, or eventually passed on to consumers remains an open question.
