Fuel price revision a course correction, but there is a long way to go
India’s decision to raise retail prices of petrol and diesel by Rs 3 per litre marks a meaningful, if partial, step toward unwinding one of the more prolonged under-recovery cycles in recent memory.
At their peak, oil marketing companies were absorbing losses of Rs 23-30 per litre on petrol and diesel, translating to a combined daily loss of Rs 1,300-1,400 crore across petrol, diesel, and LPG.
Government intervention through excise duty relief of Rs 10 per litre narrowed these to Rs 14 and Rs 17 per litre on petrol and diesel, respectively, reducing the run rate of daily loss to around Rs 1,000 crore.
The Rs 3 hike, alongside a marginal softening in crude prices, brings estimated residual under-recoveries down to Rs 10 and Rs 13 per litre, offering OMCs a degree of operational breathing room.
The overhang is far from gone, though.
Initial estimates suggest cumulative losses since the onset of the conflict had already reached Rs 70,000 crore across the three fuel categories by April and are expected to cross Rs 1 lakh crore by end-May.
Besides, cooking gas under-recoveries—the most structurally persistent of the three—remain unaddressed.
The latest price increase is, therefore, aimed at containing incremental balance sheet stress rather than restoring marketing margins, and is better read as a policy acknowledgement that absorbed costs must eventually reflect in prices.
