India holds diesel near Rs 95 as Gulf prices climb, but state firms and the exchequer are absorbing the cost

Diesel in the UAE, a major oil exporter, now costs AED 4.80 a litre, roughly Rs 123. In Delhi it sells for Rs 95.20. The difference does not mean India has escaped the global energy shock. It reflects a mix of tax cuts, losses taken on by state-run fuel retailers and a price freeze that ended only in May.

The UAE Fuel Price Committee raised diesel to Dh4.80 a litre from Dh4.30 in September, effective October 1. Diesel there is up about 77 per cent on a year ago. The committee sets prices under a monthly mechanism that tracks global energy price movements, so the surge in crude passes through to pumps quickly.

How India cushioned the blow

Delhi’s diesel price stood at Rs 95.20 a litre in early October. Rates vary by state. Mumbai pays Rs 97.83, and Hyderabad Rs 103.82.

Three measures kept prices lower than they would otherwise have been.

The first was a freeze. Petrol and diesel prices were held essentially unchanged from February 23 until May 15, even though international oil prices had risen nearly 50 per cent after the conflict began on February 28. State-owned retailers control about 90 per cent of the market, which made such a freeze possible.

The second was an excise cut. On March 27, the Centre cut excise duty on petrol from Rs 13 to Rs 3 a litre and on diesel from Rs 10 to nil. The petroleum ministry said the cut would not be passed on to consumers, and that it would instead offset the retailers’ losses. The government put the cost of the reduction at Rs 14,000 crore a month.

The third was absorbed losses. Oil marketing companies were facing an average monthly under-recovery of around Rs 30,000 crore on petrol, diesel and LPG. Without the excise cut, that figure would have risen to nearly Rs 62,500 crore. At the peak, the companies were losing Rs 23-30 a litre on petrol and diesel, according to Crisil Intelligence. India imports 88 per cent of its oil needs, which leaves it exposed to such swings.

Prices did rise

The freeze did not hold. Delhi diesel has risen Rs 7.53 a litre since May 15, from Rs 87.67 in April. The fourth increase in two weeks came on May 25, and prices have largely held since. The government said the companies were still losing about Rs 600 crore a day even after the hikes.

The opposition has attacked the increases. Congress leaders called them “fuel loot” and demanded a rollback. Karnataka Chief Minister Siddaramaiah asked what justified the fourth hike when crude prices were falling. Maharashtra Congress chief Harshvardhan Sapkal said citing the Iran war to justify the rise was misleading.

The government and analysts say the hikes were needed to repair retailers’ finances. Crisil Intelligence called the first Rs 3 increase a meaningful but partial step toward unwinding the under-recovery cycle.

What remains open is who ultimately pays: consumers through pump prices, the exchequer through forgone duty, or the oil companies through weaker balance sheets. For now, all three are bearing part of the cost.