Rosneft-backed Nayara Energy has raised petrol and diesel prices in the retail market as refiners come under pressure from rising crude prices and a weaker INR, Reuters reports, citing dealers. Nayara increased petrol prices by INR 5 / liter to INR 100.71 and diesel prices by INR 3 / liter to INR 91.31 across its some 7k retail pumps.

Market imbalance: The revision comes as state-run refiners continue to hold pump prices steady despite crude trading above USD 100 / barrel, creating uneven pricing dynamics across the fuel market.

Government slashes taxes to prevent retail fuel hike

Fearing a steep hike in retail fuel prices, the Indian government has sharply cut excise duties to cushion oil marketing companies (OMCs) from soaring crude prices, as per a notification from the Finance Ministry. The cuts are effective immediately in an attempt to stabilize margins for state-run retailers.

New duty rates: Duty on petrol has been cut by about 77% to INR 3 per litre from INR 13, while diesel duty has been slashed by 100% from INR 10 earlier.

Government rationale: With crude prices surpassing USD 100 per barrel, the Indian government is absorbing a significant fiscal impact to protect consumers and OMCs. This comes as retail prices have surged by up to 50% in Southeast Asia and 20% in European markets, Minister of Petroleum and Natural Gas Hardeep Singh Puri noted in a post on X. Fuel retailers are currently facing revenue losses of approximately INR 24 per liter on petrol and INR 30 on diesel, which the government is partially mitigating through these tax cuts.

Plus: India has reimposed windfall taxes on fuel exports, setting levies at INR 21.5 per litre on diesel and INR 29.5 per litre on aviation fuel, as per government orders. Such windfall taxes, last imposed during the Russia-Ukraine War, have returned to stabilize retail supplies and prices. This targets export-oriented refiners as domestic supply is prioritized amid surging global rates.

For context: India exported 14 mn tonnes of gasoline and 23.6 mn tonnes of gasoil between April 2025 and January 2026, though most state-run refiners have since curtailed exports. Reliance Industries remains the country’s largest fuel exporter, making it the most exposed to the new levies.

India’s crude benchmark is different

Remember, India’s crude benchmarks are tied to the Gulf. With the war intensifying, the Indian Crude Basket has surged to around USD 150 per barrel due to its heavy exposure to Gulf-linked supplies. The Indian Crude Basket is a weighted average cost of 78.8% of the Oman-Dubai sour grades and 21.2% of the Dated Brent, which the government uses to determine the retail price of petrol and diesel.

Watch for the macro fallout: While the tax cuts ease pressure on retailers and consumers, they will reduce government revenues and expand the fiscal deficit amid a depreciating INR. By slashing taxes instead of raising pump prices, the government is protecting OMCs from an estimated INR 3 tn (USD 31.7 bn) annual revenue loss while also keeping inflation in check, as per a report by financial services firm Emkay Research. A sustained uptick in crude prices will eventually trigger a major hike in retail prices and fuel inflation down the line.

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