Dr. Vinod Chandrashekhar Dixit
Petrol and diesel prices in India were hiked by ₹3 per litre on May 15, 2026 — the first increase in over four years — mainly because state-run oil marketing companies like Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited were facing severe financial strain due to surging global crude oil prices. The immediate trigger was the escalating West Asia conflict, particularly the US-Israel attack on Iran on February 28, 2026, and Iran’s retaliation that effectively shut the Strait of Hormuz, a chokepoint handling about one-fifth of the world’s oil and gas supply. This pushed Brent crude from around $69 per barrel in February to nearly $113–$123 per barrel by March, and it remained above $100 through April and May. Since India imports 85–90 percent of its crude oil, the import bill rose sharply, and with the rupee under pressure in the ₹96–98 range, paying for costlier crude in dollars became even more expensive.
Whenever petrol and diesel prices are hiked, there are protests by the public and the opposition for a few days before everyone returns to routine life. However, it must be remembered that the country’s economy is being fueled by the blood and sweat of the common man. Many nations face higher inflation due to rising global crude oil prices, and this inflation has a devastating impact on both producers and consumers, widening the gap between oil-importing and oil-exporting nations. Though crude oil prices are market-linked, the government can still reduce taxes as a relief measure to cushion the impact on citizens.
Oil companies had kept retail petrol and diesel prices frozen since April 2022 despite global volatility, absorbing losses to “insulate domestic consumers.” But by March 2026, they were reportedly facing daily under-recoveries of ₹1,000–₹1,200 crore, and even after the government cut excise duty by ₹10 per litre in March, the losses became unsustainable. The hike also came 16 days after assembly elections concluded in four states, as prices had remained unchanged throughout the polling period. While crude cost is the biggest factor, taxes remain a major component too — central excise, state VAT, and dealer commissions together make up nearly 45–55 percent of the retail price, which is why fuel costs vary from state to state. Experts warn this may not be the last hike if the crude oil crisis linked to the West Asia conflict worsens further.
High inflation, coupled with skyrocketing food prices, refuses to ease. A rise in oil prices leads to a transfer of income from oil-importing to oil-exporting countries because of changing terms of trade. The increase in crude oil prices also raises the cost of fertilizers, which require petroleum or natural gas for production, while natural gas itself faces supply constraints similar to oil. The rise in petrol and diesel prices has a ripple effect across the entire economy because almost all commodities in India are transported by vehicles running on these fuels. Any increase in fuel prices directly pushes up the prices of essential goods.
The additional burden of rising fuel prices is becoming unbearable for the public and feels like another blow to ordinary citizens. Petrol and diesel have become indispensable parts of daily life, and life without them is difficult to imagine. But with prices skyrocketing, everything around us is becoming costlier.
Price hikes hit low-wage earners and fixed-salaried middle-class families much harder than high-income groups. Due to rising fuel costs, fares for buses, autos, and taxis increase, creating serious difficulties for the common man and poor people who travel long distances for work. The increase in petrol and diesel prices directly affects ordinary citizens and worsens their hardships. With rising fuel prices, there has also been a sharp increase in the prices of food products and other essential commodities, and the poor sections of society suffer the most. Poor people work hard to earn money, and when the prices of necessities rise, survival itself becomes difficult.
The government’s inability to control petrol and diesel prices adds to public dissatisfaction, while the opposition politicizes the issue despite knowing that international crude oil prices are largely beyond the government’s direct control. Many problems also arise because of the unchecked growth of low-mileage vehicles and fuel guzzlers on the roads. Fuel pricing needs rationalization. A large part of the tax collected from fuel is used for development work, but when combined with populist subsidies, it creates fiscal stress. A sharp spike in oil prices can reverse the declining inflation trend and put pressure on both central and state governments to cut taxes on petrol and diesel, adversely impacting their non-GST revenues.
Despite heavy price hikes, the rich continue living comfortably while the burden is borne mainly by the poor and middle classes. Since India is heavily dependent on the international market for fuel, this dependence must be reduced. The tax component on fuel is still extremely high, with central excise duty and state VAT making up nearly 45 to 55 percent of the retail price. A reduction in these taxes can provide immediate relief.
A weakening rupee also adds to the burden because India imports over 85 percent of its crude oil and pays in dollars. Therefore, a weaker rupee makes imports costlier even if global crude prices remain stable. Rising diesel prices severely affect logistics and MSMEs, as small businesses and transporters operate on thin margins, and even a ₹2–₹3 increase per litre can wipe out profits and lead to job losses.
High fuel prices should ideally encourage the adoption of electric vehicles, but inadequate charging infrastructure and high upfront costs mean the common man still has no practical alternative. To control fuel-driven inflation, the Reserve Bank of India raises interest rates, making home loans and EMIs more expensive and delivering a double blow to the middle class.
In rural areas, diesel price hikes raise the cost of operating tractors, irrigation pumps, and transporting crops to markets, further reducing farmers’ incomes. Global factors such as OPEC+ production cuts, the Russia-Ukraine conflict, and tensions in the Middle East continue to keep crude oil prices volatile, and while India has little control over these developments, it bears the full impact. This volatility also underlines the need for India to strengthen its Strategic Petroleum Reserves to cushion sudden global shocks.
People are also demanding greater transparency, with a clear breakup of base price, freight charges, dealer commission, and taxes displayed at petrol pumps so consumers know exactly what they are paying for.
What India needs is large-scale development of biodiesel, higher ethanol blending, and greater government investment in alternative sources of energy, along with high-capacity goods transport and efficient public transport systems to reduce per-capita fuel consumption. The government should advise state governments to reduce ad valorem VAT on petrol and diesel while also lowering central excise duties on petroleum products.
The time has come to rethink the complete deregulation of petrol prices and consider a price stabilization fund to absorb extreme spikes. India must urgently move toward alternatives such as biofuels, CNG, electric vehicles, and solar power.
It must be remembered that petrol is inflammable, but for the common man, the price of petrol is even more explosive.
