Indian consumers should prepare for additional gradual increases in petrol and diesel prices, sources close to the matter have indicated. This comes after state-run oil companies ended a nearly four-year freeze on revisions, implementing two price hikes totaling approximately ₹4 per litre within a single week.
The first significant hike, approximately ₹3 per litre, occurred on a Friday, followed by another increase of about 90 paise per litre on the subsequent Tuesday. These adjustments aim to help oil companies recover substantial losses accumulated over the past 75 days, which were reportedly around ₹750 crore daily before the initial May 15 increase. An official from the Ministry of Petroleum and Natural Gas confirmed that the first hike reduced daily losses by a quarter.
Reasons Behind the Gradual Hikes
The decision to implement gradual price increases, rather than a sharp single jump, is a strategy to mitigate the rise in inflation and protect consumers, according to an Indian Oil Corporation (IOC) official. Despite the increases, officials do not foresee a significant reduction in fuel demand.
The four-year freeze on fuel price revisions concluded after key state elections, particularly following the ruling party's expanded influence. Global crude oil prices have surged by over 50 percent since February 28, driven by US-Israeli strikes on Iran and Tehran's retaliation, which disrupted flows through the critical Strait of Hormuz. For months, retail fuel rates remained unchanged despite the global surge, an effort by the government to shield price-sensitive consumers.
Wider Impact on Energy Costs
Beyond petrol and diesel, compressed natural gas (CNG) prices have also seen increases. On May 15, CNG prices rose by ₹2 per kg in major cities like Delhi and Mumbai, with an additional ₹1 per kg increase on Sunday.
While the recent increases have begun to address the disparity between retail prices and surging crude costs, the May 19 revisions still cover only a fraction of the hike needed to align rates with actual costs, suggesting further adjustments are likely.