This is how the prices of petrol and diesel are decided in India, why are the prices different in every state? understand the complete mathematics

Fuel Pricing Mechanism India 2026: The prices of petrol and diesel in India do not depend only on the price of crude oil in the international market. Central government’s excise duty, state governments’ VAT, cost of oil companies and global conditions play a big role in deciding the final price of fuel. This is the reason why even when crude oil becomes cheaper, common people do not get immediate relief. In recent times, this entire system has again come into limelight after the price increased thrice within 10 days.

Direct impact of global crises

In the last few years, international developments like the Russia-Ukraine war and the Hormuz crisis have caused crude oil prices to exceed $ 100 per barrel several times. In these circumstances, the government tried many times to provide relief by reducing taxes. Petrol and diesel were made cheaper by reducing excise duty in 2021, 2022, 2024 and 2025. In March 2026, the government took a historic step and reduced the excise duty on petrol and diesel by 10% each.

Different prices in different states

Petrol price (/litre)
Andhra Pradesh: 117.8
Telangana: 115.7
Kerala: 112.3
Madhya Pradesh: 111.4
West Bengal: 109.8
Maharashtra: 108.5
Karnataka: 107.7
Tamil Nadu: 105.6
Delhi/Uttar Pradesh: 99.5
Gujarat: 96.1

Heavy pressure on oil companies increases

During the Hormuz crisis, Indian oil companies did not immediately increase prices in the domestic market despite increasing international prices. During this period, the companies themselves bore the additional burden of about Rs 24 per liter on petrol and about Rs 30 per liter on diesel. Due to this, government companies suffered a loss of approximately Rs 30,000 crore. Later the government tried to reduce this loss by taking steps like tax cuts and export duties.

Oil Bond vs Tax Cut Model

Different governments adopted different policies to control fuel prices in India. The UPA government had given immediate relief by issuing oil bonds between 2005 and 2010, which increased the debt of the government in future. On the other hand, in the current policy the government tries to provide relief by directly reducing excise duty. This provides immediate benefits to consumers, but increases pressure on government revenue.

Why do prices continue to fluctuate?

India’s fuel pricing system is based on a very sensitive economic balance. Taxes of the central and state governments, under-recovery of oil companies and uncertainty of the international market together decide the prices of petrol and diesel. This is the reason why even after the tax reduction, there is no immediate relief at the pump. In the coming times, fuel prices will likely continue to fluctuate depending on the global situation and domestic tax policy.

Delhiites got a shock again! CNG prices increased for the third time in 10 days, price increased by Re 1 in the capital again

The post This is how the prices of petrol and diesel are decided in India, why are the prices different in every state? Understand the complete mathematics appeared first on Latest.