Kotak Equities Predicts Rs 15 Per Litre Price Hike, Govt Says No
Due to the ongoing geopolitical tensions between Iran, Gulf countries, and the United States of America, a few reports recently emerged which stated that we could be seeing a Rs 15–25 hike in petrol and diesel prices. However, the Ministry of Petroleum and Natural Gas has now denied any such reports of petrol and diesel prices increasing following the elections in West Bengal and other states.
The Government of India has termed such reports as “fake news,” and it is also calling them mischievous, misleading, and panic-inducing. The clarification from the Ministry of Petroleum and Natural Gas has been publicly issued as an official statement, highlighting the strong intent to control the narrative and avoid public anxiety.
Recently, a report by Kotak Institutional Equities, which is a specialist division of Kotak Securities Limited, suggested that fuel prices could rise sharply, potentially by Rs 15 per litre. This particular estimate is based on elevated crude oil prices nearing $120 per barrel, which significantly increases input costs.
The brokerage firm also highlighted that the gap between global crude costs and domestic retail prices has increased sharply, which makes the current pricing unsustainable in the long run. It also indicated that if any hike gets implemented, it would likely be phased. This is to make sure that inflation can be managed and public reaction is also controlled.
On the other hand, the Government of India has highlighted that India has not increased petrol and diesel prices in the last four years, which is not the case with other countries globally. With this statement, the government aims to highlight that consumer protection remains a priority for them despite global volatility.
Presently, global crude oil prices have surged due to geopolitical tensions in West Asia. This is especially due to key supply routes like the Strait of Hormuz getting blocked by Iran. These disruptions and uncertainty have made global oil availability tight, and it is pushing prices higher. India, which is one of the major oil importers, is directly getting impacted, with its import bill rising sharply despite lower volumes.
Additional pressure comes from a gap between futures and physical crude prices, indicating ongoing supply stress. As per the reports, the core issue which has been flagged by analysts is the increasing gap between crude procurement cost and pump prices. They have stated that domestic fuel prices have remained largely unchanged even as input costs have surged significantly.
This mismatch has created a situation where retail prices no longer reflect actual market realities. As a result of this, there is an increasing financial strain on the system. Indian Oil, BPCL, and HPCL, which are state-run companies, have been absorbing significant losses to maintain stable retail prices.
As per the reports, these companies have been facing losses of Rs 15 to 20 per litre on petrol. The losses are even higher in the case of diesel, up to Rs 35 per litre. It has been estimated that the daily losses range from Rs 800 crore to Rs 1,600 crore, with extreme scenarios even touching Rs 2,400 crore per day. Monthly burden estimates vary widely, but can go up to Rs 27,000 crore or more.
Many experts have highlighted that this sustained loss absorption is not financially sustainable in the long term. Now, for those who may be wondering how fuel prices have been so stable in the last few years—well, the answer is that fuel pricing in India depends on multiple factors beyond crude oil. These include taxes (central excise and state VAT), exchange rates (rupee vs dollar), refining margins, and inventory purchased at lower prices earlier.
At the moment, oil companies use buffers like inventory gains and refining profits to delay price hikes. These buffers mostly act as a temporary cushion, which allows price stability even during global spikes. So far, the government has taken several steps to contain price increases, which include excise duty cuts of Rs 10 per litre and windfall taxes on fuel exports. However, analysts have noted that these are short-term fixes and do not fully address structural pricing imbalances.
Many people have also stated that fuel pricing has been kept stable due to the elections that will be taking place in the coming weeks in West Bengal, Assam, Kerala, Puducherry, Tamil Nadu, and West Bengal. However, once again, the government has denied that this is the case.
In case the prices of petrol and diesel do increase by Rs 15 to Rs 28 per litre, petrol prices will be pushed close to Rs 120 per litre in major cities. As a result, the impact would extend beyond fuel. We will be seeing increased transportation costs, higher delivery and logistics expenses, inflation in goods and services, and reduced demand in sectors like automobiles and rural markets.