Fuel Price Hike Fears Rise Post-Elections Amid West Asia Tensions

As the elections have come to an end and trade disruptions along the Strait of Hormuz due to the West Asia crisis continue, a hike in fuel prices is anticipated in the country.

A recent report by Kotak Institutional Equities had suggested a potential price increase post-Assembly elections, estimating a rise of Rs 25–28 per litre.

In the backdrop of the West Asia conflict, global fuel prices and supply have been significantly impacted. Despite Iran briefly opening the Strait of Hormuz during the ceasefire, tensions have once again escalated as Trump has temporarily called off Project Freedom, while the US blockade continues during negotiations.

Kotak, in its study, flagged that while India has seen a 13 to 15 per cent decline in import volumes, the crude import bill has risen by $190–210 million, significantly impacting the overall energy balance.

Kotak noted that the burden of not passing higher fuel costs has fallen on refiners. It estimates that this has an incremental impact of around ₹270 billion per month on Oil Marketing Companies (OMCs).

Petroleum and Natural Gas Minister Hardeep Singh Puri had indicated that oil marketing companies were incurring losses of about Rs 24 per litre on petrol and Rs 30 per litre on diesel, as they continued to sell fuel below cost.

The government has only been able to partially offset the pressure by providing relief through measures such as a ₹10 per litre excise duty cut and the reintroduction of windfall taxes on exports.

Kotak had also noted that any revision was unlikely before the conclusion of the Assembly elections on April 29, given political considerations.

Currently, fuel prices across major cities remain unchanged, as per reports. In Delhi, petrol is priced at ₹94.77 per litre and diesel at ₹87.67 per litre, while in Mumbai, petrol is retailing at ₹103.49 per litre and diesel at ₹90.03 per litre. Prices in cities like Bengaluru, Hyderabad, and Kolkata continue to hover above ₹100 per litre for petrol.

The government has debunked reports of an expected post-election fuel price hike. The Ministry of Petroleum and Natural Gas, in late April, took to X, stating that such reports are “fake news.”

The ministry said, "FAKE NEWS. There are some news reports suggesting a price hike of petrol and diesel. It is hereby clarified that there is no such proposal under consideration by the government. Such news items are designed to create fear and panic amongst the citizens and are mischievous and misleading."

It also added that India is the only country in the world that has not hiked petrol and diesel rates in the past four years. "Govt of India and Oil PSUs have taken relentless steps to insulate Indian citizens from steep increases in international prices."

However, according to a more recent PTI report, government sources indicate that the possibility of a petrol and diesel price hike in the near future is not ruled out.

Admist these speculations of a price hike, International Monetary Fund Director of the Asia Pacific Department, Krishna Srinivasan, said at an event that India will eventually have to pass on higher crude oil prices to consumers, as intentionally holding fuel prices artificially low for a prolonged period could distort market signals.

“They (govt) have cut excise taxes on oil. They provide some fertiliser subsidies. This can continue for some time, not much more in terms of fiscal space. At some point in time, you have to allow price signals to start to flow. And that’s something which is true for India,” he said.

The Director added that while inflation remains under control for now, countries like India will eventually need to allow full price pass-through to maintain fiscal discipline and ensure efficient energy use.