Indian state-owned refineries have raised fuel prices for the first time in four years.
New Delhi took this step under pressure from rising global oil prices and billions in losses at domestic refineries, Bloomberg reports.
Diesel and gasoline prices rose by just over 3%—a modest increase considering the nearly 50% jump in Brent crude prices since the start of the conflict. In New Delhi, diesel now costs 90.67 rupees per liter, and gasoline 97.77 rupees (the highest since May 2022).
India is the world's third-largest oil importer. The government typically prioritizes protecting its 1.4 billion consumers from inflation, but today's increase suggests that the authorities are beginning to seek a balance between society and the market.
State-owned retailers control 90% of the country's gas stations. Technically, they have free rein over pricing, but the government (as the majority shareholder) has kept prices frozen since March 2024. With oil at $107 per barrel, the largest state-owned companies (Indian Oil, Bharat Petroleum, and Hindustan Petroleum) are losing 10 billion rupees ($104 million) daily on retail sales. Shares of these companies fell 1-3% at the start of Friday trading in Mumbai.
According to Radhika Piplani, an economist at Motilal Oswal Financial Services, even after the price increase, retailers will lose 15 to 20 rupees on every liter sold. By comparison, at private Shell stations, gasoline already costs over 110 rupees, and diesel is almost 120 rupees.
In March, the government reduced fuel taxes, but this did not offset the losses. According to Macquarie Research, to break even, refineries need global oil prices of $80–85 per barrel.
The modest increase of just 3 rupees per liter is driven by fears of inflation (amid a weak rupee and expensive oil). However, this could be paving the way for further steps.
"The current increase is insufficient, but it could be the beginning of a series of gradual steps. A 5-rupee per liter increase would be a good start," notes Madhavi Arora, an economist at Emkay Financial Services.
The market expected a price increase immediately after regional elections at the end of last month. These rumors triggered a surge in demand: in some states, fuel stations ran out of fuel, despite Prime Minister Narendra Modi's personal calls to reduce consumption.