Why petrol and diesel prices will be in focus in the coming days

Fuel prices are likely to remain in focus in the coming days as mounting losses at state-owned oil marketing companies (OMCs), rising global crude prices and calls from industry to roll back tax cuts add to expectations that the government may have to take a call on petrol and diesel rates.

State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) are together incurring under-recoveries of ₹1,600-1,700 crore every day by selling petrol, diesel and cooking gas LPG below cost, reported PTI, citing people familiar of the matter.

The cumulative under-recovery over the past 10 weeks of conflict in West Asia has crossed ₹1 lakh crore, the report said.

Despite a nearly 50% rise in crude oil prices during the period, petrol and diesel prices have remained unchanged at two-year-old levels of ₹94.77 per litre and ₹87.67 per litre, respectively.

LPG prices were raised by ₹60 per cylinder in March, but are still below actual cost.

The pressure on OMC finances has raised concerns over how long they can continue absorbing losses without additional borrowing.

"If elevated crude prices persist for an extended period, OMCs may require higher working capital borrowings and calibrated reprioritisation of some capex timelines," PTI quoted one of sources as saying.

CII seeks fuel excise rollback

The prospect of a fuel price hike has also gained traction after the Confederation of Indian Industry (CII) recommended that the ₹10 per litre central excise duty cut on petrol and diesel be progressively rolled back over six to nine months as crude prices stabilise.

The tax reduction, announced to cushion consumers from the global energy shock, has reportedly cost the exchequer around ₹14,000 crore a month.

"The ₹10 per litre central excise cut on petrol and diesel, taken at significant cost to the exchequer, should be progressively rolled back in tranches over six to nine months as crude prices stabilise," CII said while unveiling a five-point industry action agenda amid the West Asia crisis.

The industry body also suggested measures such as a 45-day MSME payment guarantee, supply-chain ring-fencing through deeper import substitution, front-loading of private capital expenditure, voluntary price restraint and higher internship intake.

"There is no doubt that a fuel price hike has become inevitable, but the timing and quantum of increase have to be decided by the government," PTI quoted a source as saying.

A CNN-News18 report, citing Finance Ministry sources, said that the government cannot keep funding OMCs indefinitely amid rising global oil pressures.

PM Modi's appeal for fuel saving measures

Prime Minister Narendra Modi's appeal to citizens to reduce fuel consumption has also put retail fuel prices under spotlight.

Addressing a public meeting in Hyderabad on Sunday, Modi urged people to avoid non-essential foreign travel, postpone gold purchases, use public transport and electric vehicles, and revive work-from-home and virtual meetings to reduce fuel use and save foreign exchange.

"All of this will reduce dependency on petrol and diesel, and thereby cut the dependence on foreign currency," he said.

The remarks came as India's foreign exchange reserves fell by USD 7.79 billion to USD 690.69 billion in the week ended May 1, according to Reserve Bank data.

India imports over 85% of its crude oil needs, making domestic fuel prices highly sensitive to international oil market movements.

With OMC losses mounting, fiscal costs rising and industry pushing for tax rollback, petrol and diesel prices are expected to remain closely watched by consumers, markets and policymakers in the days ahead.