Govt Increases Petrol, Diesel And CNG Prices: Citizens React Angrily [Video]

Petrol and diesel prices went up by Rs 3 per litre on Friday, May 15, in the first such hike in over four years. In Delhi, petrol now costs Rs 97.77 per litre, up from Rs 94.77, while diesel moved to Rs 90.67 from Rs 87.67. Mumbai petrol crossed Rs 106 a litre. CNG prices have been hiked by Rs. 2/Kg.

The immediate trigger is the sustained spike in global crude prices driven by the West Asia conflict, with Brent crude hovering between $104 and $110 per barrel after hitting a peak of over $120 earlier this year.

The Rs 3 hike has drawn immediate public anger, but it is worth noting how incomplete the picture actually is. Analysts had estimated the full correction needed at Rs 25 to 28 per litre. Measured against that, this is barely a first step.

Citizens react angrily

Oil Marketing Companies (OMCs) like Indian Oil, BPCL, and HPCL were reportedly selling petrol at a loss of around Rs 14 per litre and diesel at nearly Rs 18 per litre before this revision. The Rs 3 hike recovers only a small fraction of those losses. More increases could follow.

A deregulation promise that keeps breaking

Here is the longer-standing problem: fuel prices were formally deregulated, petrol in 2010 and diesel in 2014. The promise of deregulation is that prices move with the market, both up and down. When crude is expensive, consumers pay more. When crude is cheap, they pay less. That is how a market mechanism is supposed to work.

But the practice has not matched the promise. When crude prices crashed after 2014, and again during the COVID-19 period when oil briefly went negative, retail fuel prices barely moved. The government and OMCs absorbed the difference as margins rather than passing savings to the pump. The current hike is a reminder that the downward pass-through never happened, but the upward revision is very much alive.

The oil bonds argument has run out of road

For years, the government justified not cutting prices during low-crude phases by pointing to the oil bonds issued by the previous administration. Between 2005 and 2010, the UPA government issued bonds worth roughly Rs 1.4 lakh crore to compensate OMCs for under-recoveries. The argument went: the current government inherited this liability and was using the windfall from cheap crude to service it.

That rationale no longer holds. The Rs 3 hike comes after a period where crude prices were below $75 per barrel for extended stretches, a regime that lasted several years. During that window, the government collected taxes that significantly exceeded the total value of the oil bonds, interest included. The bond servicing argument was a valid one early in the decade. Applied now, it is a stretch.

What true deregulation would look like

The current framework is one-sided: prices go up when crude rises, but do not come down when crude falls. This is not market pricing. It is selective pricing, where the government captures upside and consumers absorb the downside.

The practical consequence is that the deregulation label exists on paper while the actual pricing behaviour remains closer to the old Administered Price Mechanism, just with less transparency.

For prices to function as a genuine signal to consumers, and to encourage the kind of behaviour shifts like moving to EVs or two-wheelers that the government says it wants, there needs to be a clear, rule-based mechanism that links retail prices to the landed cost of crude, with a defined tax component that stays fixed.

The current approach, where prices are frozen for 49 months and then revised with no stated formula or schedule, leaves consumers unable to plan and sustains exactly the kind of public frustration visible today.