New Delhi:
The Centre provided Rs 1.23 lakh crore to oil marketing companies as financial support in the first 78 days since the war started in the Middle East and crude oil prices increased significantly, government sources told NDTV on Tuesday.
This was done to ensure that the prices of petrol and diesel were not increased during the Middle East crisis and that common people were cushioned from its impact, they said, adding that the figure was inclusive of the reduction in excise duty on petrol and diesel.
However, after compensating state-owned oil companies for their losses over those 78 days, the Ministry of Finance determined that extending further financial support to a single sector would not be appropriate, the sources said.
Consequently, the government decided that state-owned oil companies would need to pass on a portion of the rising crude oil and gas costs to consumers. The companies then began raising the prices of petrol, diesel, and LPG starting May 15.
According to a senior government representative, despite the price hikes implemented over the past few weeks, state-owned oil companies are still incurring a daily financial loss of approximately Rs 652 crore.
A recent report by the Petroleum Planning and Analysis Cell (under the Ministry of Petroleum) indicates that the average price of crude oil (Indian basket) remained high, at $114.48 per barrel in April and $106.23 per barrel in May.
Even now, the price of crude oil in the international market hovers around $93-94 per barrel. During this period, international LPG prices have also surged by more than 46%.
On Friday, RBI Governor Sanjay Malhotra warned, “The global economic situation is deteriorating. Prolonged supply chain disruptions and elevated energy prices are likely to impact both the growth rate and the inflation rate.”
Malhotra said India’s real GDP growth rate for the current financial year is projected at 6.6%, against the RBI’s previous estimate of 6.9%.
While releasing the Monetary Policy Statement, the RBI Governor noted that crude oil prices (Indian basket) have averaged $110 per barrel over the last two months. The impact of high global crude oil prices on retail petrol and diesel prices in India began to be felt in May. Taking all these factors into account, the RBI has projected the CPI (Consumer Price Index) inflation rate for the year at 5.1%, which is 50 basis points higher than the earlier estimate.
Import Pressures
India imports over 85% of its crude oil requirements and approximately 60% of its LPG from international markets. Of this, about 40% of the crude oil and 90% of the LPG typically reached India
Consequently, petrol and diesel prices in India have already been raised four times since May 15, 2026. On Sunday, state-owned oil companies decided to hike domestic LPG prices by Rs 29.
To mitigate the impact of the crisis in the Middle East, sources said, the Indian government, in collaboration with oil companies, has significantly diversified its LPG import sources, and stocks are now being imported from new markets across the globe. However, this has led to a substantial increase in the cost of LPG imports.
According to the Ministry of Petroleum, even after the price hike on Sunday, oil companies face an under-recovery of Rs 600 to Rs 700 per domestic LPG cylinder. The cost of supplying a single cylinder has risen to approximately Rs 1,600-1,700, driven by a nearly 50% increase in the Saudi CP benchmark for LPG since January.
According to government data, the under-recovery on domestic LPG is estimated to have risen to Rs 60,000 crore over the past year, up from Rs 41,338 crore a year earlier.
