In May 2026, major oil companies in India such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum raised petrol and diesel prices by about ₹4 per litre. Despite this, they are still losing money daily. Global crude oil prices have surged to around $104-$110 per barrel due to supply issues in West Asia. The price hikes have eased some losses but haven’t covered the rising costs of importing crude oil. These companies now have to manage without government subsidies, making their financial situation precarious.
Another layer to this issue is fuel taxation. The central government has adjusted excise duties, but states still play a huge role in setting consumer prices. States rely heavily on fuel taxes for revenue, with some deriving up to 30% of their total tax income from this source. Unfortunately, bringing fuel under the Goods and Services Tax (GST) framework or lowering VAT could lead to substantial budget shortfalls. This might impact everything from infrastructure projects to social programs.
Different oil companies are feeling the strain in unique ways. Hindustan Petroleum is particularly vulnerable because it focuses more on fuel sales. In contrast, Indian Oil has operations in refining and jet fuel, which provides some cushion. Although the oil sector recently reported strong profits compared to last year, much of this came during a period of stable crude prices. If those prices fluctuate, maintaining profits could be a challenge. Investors are also cautious, as government price policies add uncertainty and can impact stock values.
There’s a growing consensus that a long-term solution is needed for the fuel sector. Lawmakers are suggesting talks with the Finance Ministry to consider integrating fuel into the GST system. This could simplify tax structures, reduce transport costs, and help keep inflation in check. However, since both central and state governments depend on fuel tax revenue, making this change isn’t straightforward. Any systemic reforms will take time and must balance consumer relief with the need for government funds.
Recent articles suggest that integrating fuels into GST could lead to a more stable marketplace. Experts believe that it could help alleviate some consumer burdens and contribute to a more consistent funding model for various government services. In a survey by the Finance Ministry, about 60% of respondents expressed support for discussions around fuel tax reforms, indicating a public desire for change.
As the situation evolves, the focus will remain on global oil prices and government policies. The health of the fuel industry is essential not just for the companies involved, but also for consumers and the broader economy. Ultimately, finding a balance will be crucial for everyone involved.
