Fuel Up Rs 3: Why Petrol, Diesel Prices Rose After Weeks Of Centre Holding The Line

Analyst Dhaval Popat noted that each Rs 1 per litre rise in retail margins could boost EBITDA by 12-17% across major state-run refiners, while LPG under-recoveries continue to weigh profitability.

The Rs 3 per litre increase is presented as a partial pass-through intended to offset marketing losses, with the possibility of further hikes if crude prices remain high and margins stay stressed.

The central government had cut excise duty to reduce consumer burden, resulting in an estimated revenue loss of Rs 14,000 crore per month, contributing to the overall pressure on energy pricing policy.

With oil shipments slowed by conflict, countries competed for available cargoes, pushing freight and insurance costs higher and increasing the landed cost of oil in India.

The ongoing Iran conflict disrupted global oil supply via tensions around the Strait of Hormuz and shipping delays, contributing to crude prices rising from around $69 to about $113-114 per barrel.

The rupee slid to a record low near 95.95 per dollar, amplifying the cost of imported crude priced in USD and raising overall costs for India’s oil purchases.

Petrol and diesel prices were increased by Rs 3 per litre on Friday after weeks of central government trying to hold the line. The move comes as under-recoveries persist and costs remain elevated for oil marketing companies.

For nearly 10 weeks, India's three state-run fuel retailers sold petrol and diesel at old prices while their costs rose, resulting in losses estimated at Rs 1,600 crore per day and crossing Rs 1 lakh crore in total over the period.