Oil prices slipped below $60 a barrel on Monday for the first time in four years, offering a potential boost to Indian refiners’ margins and creating an opportunity for the government to increase fuel duties and capture part of the gains.
Crude prices declined after producer group OPEC+ agreed to raise output by 411,000 barrels per day in June – the second consecutive monthly increase following a similar move in May. The decision comes amid growing concerns over a global economic slowdown and weakening fuel demand. International benchmark Brent has fallen nearly 20% since the start of the year.
Despite the decline in global oil prices, petrol, diesel and cooking gas are unlikely to become cheaper anytime soon for Indian consumers, according to an industry executive who spoke on the condition of anonymity. Prices of other refined products such as jet fuel will, however, see some decline, the executive added.
Petrol and diesel prices were decontrolled years ago in India, but a 90% share of state-run companies in the fuel retail market gives the government a big influence on pricing. Private retailers like Reliance-BP and Nayara Energy too align rates with government companies’ pumps. Cooking gas is a controlled commodity.
With no major elections scheduled in the near future – the Bihar assembly election is about six months away – the government is unlikely to push oil companies to reduce prices, the executive said. Instead, it may allow refiners to build a margin buffer that could be utilised later, he added.
The government may also consider increasing excise duties on petrol and diesel to moderate refiners’ growing retail margins and capture a portion of the benefits from falling crude prices.
The Centre last month raised the excise duty on petrol and diesel by ₹2 per litre in response to a price slump. It gains ₹16,000 crore a year on every rupee of duty hike on petrol and diesel. Lower crude prices will also help reduce India’s oil import bill, which rose to $137 billion in 2024-25 from $133 billion in the previous fiscal year.
Retail prices of petrol and diesel have remained largely unchanged over the past two years, except for a ₹2 cut in March 2024 ahead of the general election. The last time Brent crude fell below $60 – in February 2021 – the excise duty in Delhi was ₹32.98 per litre for petrol and ₹31.83 for diesel. Currently, it is ₹21.90 on petrol and ₹17.80 on diesel.The refining margins of state-run refiners are aligned with international prices, but their retail margins remain opaque.
According to ICICI Securities, Indian Oil Corp had an estimated retail margin of ₹8.10 per litre on petrol and ₹4.70 per litre on diesel in the fourth quarter of FY25.
