The retail prices will vary across cities due to the different levies by various States.
Oil marketing companies have absorbed losses of close to Rs 1,000 crore a day, with under-recoveries running to nearly Rs 2 lakh crore in first quarter of 2026.
“The 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,” Sehul Bhatt, Director, Crisil Intelligence, said.
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, he noted.
“TThe 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,” Bhatt said.
Initial estimates suggestED cumulative losses since the onset of the conflict had already reached Rs 70,000 crore across the three fuel categories by April and were expected to cross Rs 1 lakh crore by end-May, he noted.
Besides, cooking gas under-recoveries—the most structurally persistent of the three—remained unaddressed, Bhatt said.
The latest price increase was, therefore, aimed at containing incremental balance sheet stress rather than restoring marketing margins, and was better read as a policy acknowledgement that absorbed costs must eventually reflect in prices, he said.
“The price hike was anticipated following the global surge in crude prices and the widening gap between the Wholesale Price Index (WPI) and Consumer Price Index (CPI) inflation numbers. This divergence was due to the absorption of price hike by the government and the OMCs, thereby insulating the consumers,” Megha Arora, Director, India Ratings and Research, said.
However, given the prolonged uncertainty over the duration of the West Asia conflict and the crude prices, on the one hand, and rising fiscal pressure on the government and the OMCs, on the other, the transmission of elevated prices had long been anticipated. This passthrough was likely to increase CPI inflation by 15 basis points, she said.
Diesel price hike was likely to be felt wider given its usage in transportation, boats for coastal fishing, tourism, e-commerce industry and for running aerators by aqua farmers, among others, Arora said.
On Thursday, the milk price increased nationwide due to rising expenses related to cattle feed and packaging. This was expected to increase the CPI inflation by 26 basis points, she added.
The combined effect of petrol, diesel and milk price was likely to increase the CPI inflation by around 42 basis points. The actual impact was likely to be higher via the fuel user industry like transportation and others. However, the impact in the month of May 2026 could be around 20 basis points, Arora said.
India Ratings said if the global crude price remained elevated, additional price hikes in the coming months could not be ruled out given the fiscal pressure on the government and losses borne by the OMCs. The retail inflation in the month of May 2026 could inch up to 3.8 per cent, it said.
