In comparison to other countries of the world, there has been a very low increase in the prices of petrol and diesel in India.
Petrol and diesel prices in India increased for the fourth time in 11 days on May 25. During this period, the price of petrol in the country’s capital Delhi saw an increase of Rs 7.35 per liter and the price of diesel increased by Rs 7.53 per liter. This means that during this period there was an increase of 7.7 percent in the price of petrol and more than 8.6 percent increase in the price of diesel. If we compare this increase with the rest of the countries of the world, it is quite less. Leaving aside the Gulf countries, the increase in fuel prices in India has been very less compared to other big and small countries of the world. Let us try to understand this in terms of statistics.
The reason for this increase
The closure of the Strait of Hormuz by Iran on February 28, 2026 led to a sharp rise in prices in global oil markets. The price of Brent crude increased to $ 126 per barrel. Every major oil-importing economy in the world was faced with only one choice: either pass on the increased cost to the exchequer, or pass it on to consumers at the pump. Most of the countries passed the burden of increased costs on consumers. India did not do so – at least not immediately.
From February 28 to May 15, i.e. for 78 days, the government did not make any significant change in the prices of petrol and diesel. Oil marketing companies (OMCs) were incurring losses of around Rs 1,000 crore daily. It was only in mid-May that four rounds of increases—on the 15th, 19th, 23rd, and 25th—began to reduce the deficit to some extent. Even after these four increases, India has passed on only a small part of the rise in global prices to its consumers.
Much less increase compared to the rest of the world
The special thing is that in comparison to other countries of the world, India has increased the prices of petrol and diesel very less. It is also useless to compare it. The 7.7 percent increase in petrol prices in India is less than in Japan (9.7 percent). This is less than every European economy. Less than every South Asian neighboring country. And it is less than America (44.5 percent). Myanmar increased pump prices by almost 90 percent. Pakistan did 55 percent.
The global average increase is 22.4 percent — almost three times higher than India’s figure. Overall, even after the increase in petrol price in Delhi, the price of Rs 102.1 per liter is the lowest among all the economies of the world which do not subsidize petrol. Petrol is now being sold at more than Rs 150 per liter in every major developed economy, the EU average is Rs 179.
India’s two big neighbors — Pakistan and Nepal — have also crossed the Rs 135 mark despite low per capita incomes. The only economies with prices consistently lower than India are those that provide direct subsidies, such as Malaysia and the UAE, or the US, where fuel tax rates are structurally low.
Why different prices in Indian states?
The central excise duty on petrol and diesel is the same in every state. What varies greatly is the value added tax (VAT), which each state government imposes on its own. This accounts for most of the difference in petrol pump prices, and the difference between the states with the highest VAT and the states with the lowest VAT reaches several rupees per litre.
Among the states with the highest petrol pump prices: Petrol is sold at Rs 118.3 per liter in Telangana, Rs 114.9 in Kerala, and Rs 110.3 in Karnataka. On the other hand, Delhi, Uttar Pradesh, Gujarat and Haryana — all of them are at Rs 102.1 or less — which is the lowest price across the country after Sunday’s hike. This difference reflects the VAT rate set by each state government, which ranges from around 20 percent to more than 30 percent, and some states also add a per liter infrastructure cess on top of this.
The difference is highest on diesel — a fuel used for freight transportation, farming and rural irrigation. The price of diesel in Telangana is Rs 106.7 per liter. In Haryana it is Rs 90.5. This difference of Rs 16 has to be paid every day by every truck driver, every government bus, every tractor and every diesel irrigation pump running in high VAT states.
State VAT on fuel is decided automatically by each state legislature and is not linked to central excise rates. When the Central Government reduced the excise duty by Rs 10 per liter on March 27, 2026, some states passed the entire benefit directly to the petrol pumps. Some states made no changes to VAT, which means consumers in those states got less relief overall. The data above shows the current VAT status of each state as of May 25, 2026.
Did India make fuel cheaper during Russia-Ukraine war?
The increase in May 2026 should be seen in the context of the long period of the last four years. Between the Russia-Ukraine war that began in February 2022 and the Hormuz crisis in 2026, the government reduced retail prices of petrol and diesel four times. During the Russia-Ukraine war, India was the only economy among the G20 countries to reduce pump prices — reducing the price of petrol by Rs 18 and diesel by Rs 16 by cutting Central Excise Duty twice in November 2021 and May 2022. All other major importer economies raised prices, and in many cases by significantly more. India did not do this.
When the Hormuz crisis struck, the government’s first move was to cut prices again — on March 27, 2026, the special additional excise duty (SAED) on petrol was cut by Rs 10 per liter and on diesel by Rs 10, bringing the excise duty on diesel to zero. The government treasury itself bore the burden of the revenue shortfall of about Rs 30,000 crore, rather than letting the burden fall on the pump. The four price changes made by oil marketing companies in May are the first major increase in retail prices in almost four years.
What has this really cost?
Protecting prices at the pump doesn’t mean costs go away. This means the costs are met from elsewhere — either through excise duty cuts from the exchequer, or through ‘under-recovery’ by OMCs (oil marketing companies). The figure of cost absorption from 2021 till now is quite huge.
- During the Russia-Ukraine war, OMCs shouldered the burden of under-recovery on petrol and diesel totaling about Rs 24,500 crore.
- OMCs had to bear an additional expense of Rs 40,000 crore to protect domestic LPG prices in the financial year 2024-25.
- The reduction in SAED (Special Additional Excise Duty) on March 27, 2026 has caused a loss of Rs 30,000 crore to the exchequer in the current financial year alone.
- Additionally, the government is also repaying the ‘oil bonds’ issued by the UPA government between 2005 and 2010 — amounting to Rs 1.34 lakh crore as principal amount, and thousands of crores of rupees of interest on it.
- These were liabilities that had been deferred in previous rounds of price management, to keep prices at the pump artificially low, but were passed on to future taxpayers.
- This mechanism is very important. The current approach cuts excise duty in a transparent manner, passes the benefit on to the consumer on the same day, and immediately recovers the loss in revenue. In this, neither any bond is issued, nor any liability is deferred, nor is any burden of payment imposed on any future taxpayer.
- The 2014 pump prices, which the opposition presents as a ‘benchmark’, were actually partly a ‘deferred invoice’ — which the current government is still paying.
The government itself bore the burden
After four price revisions in May, petrol and diesel prices in India are lower than almost every other comparative economy in the world. This is the result of a record of the last four years, in which the government itself has borne the burden of the two biggest jumps in oil prices since the 1970s, instead of passing it on to consumers at the pump. The increase in petrol prices by a little more than Rs 7 per liter is not a failure in protecting consumer interests. Rather, it is a delayed and partial end to that safety net — and yet, it is the smallest price correction of all the major economies facing similar global shocks today.
