Petrol, Diesel Price Hike on Cards? OMCs Reportedly Lose Rs 1 Lakh Crore in 10 Weeks

Prime Minister Narendra Modi has appealed to citizens to cut use of petrol and diesel, a move officials link to likely increases in petrol and diesel prices as global crude costs soar and losses mount at state-run oil marketing companies, which are already under pressure from frozen pump rates since early April 2022.

Government officials and sector executives said the weekend appeal could mark the build-up to a long-delayed fuel price revision. They noted that discussions between the finance ministry, petroleum ministry and oil marketing companies are focused on how any change in petrol and diesel prices might affect inflation, fiscal pressures and consumer sentiment.

Global crude shock and India’s petrol and diesel prices

According to data from the Petroleum Planning and Analysis Cell, the average price paid by Indian refiners for imported crude climbed to $104.68 in May, compared with $69.01 in February, before the conflict began. Benchmark Brent hovered near $72.50 on February 28, but by May 11 it had reached about $105 after briefly easing.

During intense phases of the conflict in West Asia, Brent even crossed $120 per barrel, heightening concern in New Delhi. While India has avoided immediate supply disruption by diversifying crude sources, analysts said the country’s heavy import reliance and dependence on the Strait of Hormuz, which has almost remained shut since February 28, leave India vulnerable.

OMC losses and pressure on petrol and diesel prices

Petroleum and natural gas minister Hardeep Singh Puri wrote on LinkedIn on May 10 that under-recoveries at oil marketing companies could reach about Rs 2 lakh crore this quarter. Puri estimated losses at around Rs 1 lakh crore already, as companies buy costlier crude, gas and LPG but sell fuel domestically at lower prices.

Puri said state-run fuel retailers are losing up to Rs 1,000 crore each day because they absorb higher input costs. Puri added, "We have managed to protect the more than 60 million consumers who visit the retail stations everyday. Still further, the Modi government reduced excise duties on retail fuel and saw revenue losses of Rs 14,000 crore in a month," highlighting the strain on public finances.

Market structure behind stable petrol and diesel prices

Retail prices of petrol and diesel in India have stayed almost unchanged since early April 2022, compressing marketing margins and weighing on the balance sheets of oil marketing companies. Official sources earlier told Moneycontrol that state-owned fuel retailers may soon raise petrol and diesel prices to offset ongoing losses on sales of petrol, diesel and LPG.

A senior government official said, "OMCs are incurring under-recoveries on sales of petrol, diesel and LPG and are in regular touch with the petroleum ministry and the finance ministry, where discussions on price hikes are taking place," indicating that a decision could hinge on crude movements and political calculations.

Analysts’ view on crude, reserves and petrol and diesel prices

Sourav Mitra, Partner-Oil and Gas at Grant Thornton Bharat, said, "With crude prices well above the comfortable $65–70/bbl range, this situation is financially unsustainable, and a price hike appears increasingly inevitable if elevated prices persist," underlining the gap between import costs and current domestic rates.

Mitra added that India’s combined strategic and commercial oil storage can cover around 74 days, which equates to nearly 60 days of supply, while dedicated strategic reserves alone provide about 9.5 days. Mitra noted, "In this backdrop, the Prime Minister's call to reduce fuel consumption is aimed at moderating demand pressures, however, diesel consumption is structurally harder to cut given its critical role in goods transportation," pointing to limits on demand reduction.

Conflict backdrop and pressure on petrol and diesel prices

The US-Iran war has entered its third month, intensifying uncertainty in oil markets. On February 28, when the US and Israel struck Iran, Brent futures traded near $72.50 per barrel, before rising sharply. The recent diplomatic push suffered a setback on May 10 when American President Donald Trump called Iran’s response to a peace proposal "totally unacceptable".

The conflict has hit flows from several energy producers in West Asia. The near shutdown of traffic through the Strait of Hormuz since February 28 has heightened supply fears. For India, which depends heavily on imported crude transported through this route, prolonged disruption could sharpen risks around both availability and costs of petrol and diesel.

Government appeal to citizens on petrol and diesel use

Against this backdrop, Modi has urged people to restrict use of petrol and diesel, shift to public transport where possible and practise car pooling more often. The Prime Minister framed the appeal as an effort to conserve energy, ease pressure on India’s import bill and support economic stability during the ongoing military conflict in key oil-producing areas.

Puri endorsed the message, stating, "Measures such these will help the nation conserve energy, save on the energy import bill and overcome the challenges arising out of the serious military conflict involving many energy producing nations," and stressed that consumer cooperation could help soften demand at a time of expensive imports and limited pricing flexibility.

Officials and analysts said the combination of higher global crude prices, sustained losses at oil marketing companies and limited fiscal room makes a fuel price hike increasingly likely if present trends hold. Modi’s call for lower petrol and diesel consumption is therefore viewed as part of a broader attempt to manage demand, protect consumers and navigate a difficult energy market.