Petrol & Diesel Prices in India — How They're Set and Why They Change Daily

India is one of the few countries where petrol and diesel prices change every single day. If you have ever wondered why your morning fill-up costs a different amount from yesterday, or why fuel in Mumbai is significantly more expensive than in Delhi, this guide breaks down the entire pricing mechanism — from crude oil on international markets to the final number on the pump.

How Dynamic Daily Pricing Works

Since June 2017, India has followed a dynamic daily pricing system for petrol and diesel. The three major Oil Marketing Companies (OMCs) — Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) — revise fuel prices every morning at 6:00 AM IST. These revised prices take effect immediately at retail outlets across the country.

Before 2017, prices were revised once every fortnight. The shift to daily revisions was intended to align Indian fuel prices more closely with global crude oil movements, reducing the political pressure that built up during fortnightly hikes and smoothing out the impact on consumers through smaller, incremental changes.

You can check today's petrol prices across India on our tracker, which updates daily to reflect the latest OMC revisions.

The Price Breakdown: What You Actually Pay For

The retail price of petrol or diesel at the pump is the sum of several components. Each one adds a layer of cost, and the final price varies depending on where you live. Here is how the typical price of one litre of petrol breaks down.

1. Crude Oil Cost (Base Price)

India imports roughly 85% of its crude oil, primarily from the Middle East, Africa, and Russia. The price of the Indian basket of crude — a weighted average of Oman, Dubai, and Brent grades — forms the foundation of fuel pricing. When Brent crude rises from $75 to $85 per barrel, the base cost of petrol and diesel increases proportionally. Currency fluctuations also matter: a weaker rupee against the US dollar makes imports more expensive, even if crude prices remain stable.

2. Refining Cost and Margin

Crude oil must be refined into petrol and diesel at refineries operated by IOCL, BPCL, HPCL, and Reliance Industries, among others. The refining margin — the difference between the cost of crude and the revenue from refined products — adds approximately 3 to 5 per cent to the base cost. India has significant refining capacity, and companies like Reliance operate some of the largest and most complex refineries in the world.

3. Central Excise Duty

The central government levies an excise duty on both petrol and diesel. As of early 2026, excise duty on petrol is approximately 19.90 per litre and on diesel approximately 15.80 per litre. These rates have been adjusted multiple times in recent years — they were significantly increased during 2020 when crude prices crashed, and partially rolled back in late 2021 and 2022 under public pressure. Excise duty is a flat amount per litre, not a percentage, so it does not scale with crude prices.

4. Dealer Commission

Petrol pump dealers earn a fixed commission of roughly 3.70 to 3.90 per litre on petrol and a similar amount on diesel. This covers the operational costs of running the retail outlet — staff, equipment, maintenance, and rent. Dealer commissions are set by the OMCs and do not vary much across the country.

5. State VAT (Value Added Tax)

This is where the biggest variation comes in. Petrol and diesel are not covered under GST in India. Instead, each state levies its own Value Added Tax (or sales tax) on fuel. Unlike excise duty, VAT is typically a percentage of the pre-VAT price, which means it compounds with every other cost component. VAT rates on petrol range from roughly 15% in states like Andaman and Nicobar to over 35% in states like Maharashtra and Telangana.

This is the primary reason why petrol prices in Mumbai can be 8 to 12 rupees higher per litre than in cities with lower state taxes.

Illustrative Price Breakdown (Petrol, Delhi)

Note: These are illustrative figures. Actual prices change daily. You can always check the latest Delhi petrol prices on our tracker.

Why Prices Differ Between States

The single biggest reason for inter-state price variation is VAT. Because petrol and diesel remain outside the GST framework, each state sets its own tax rate. The difference can be dramatic.

Some states also impose additional surcharges, infrastructure cesses, or pollution levies on top of the base VAT. For example, Mumbai adds a local body tax on top of Maharashtra's already high VAT, which is why Mumbai consistently ranks among the most expensive cities for fuel in India. You can compare prices across Maharashtra to see this in action.

Why Prices Differ Between Cities in the Same State

Even within a single state, you will notice price differences between cities. This happens for several reasons.

• Transportation costs: Cities closer to refineries or fuel depots receive fuel at a lower delivered cost. A city 500 km from the nearest depot will pay more than one that is 50 km away, because the trucking cost is passed through to the retail price.
• Local body taxes: Some municipal corporations levy additional taxes. Mumbai's octroi (now subsumed into local body tax) is the most famous example, but several other cities impose similar levies.
• Depot pricing: OMCs set different depot-level prices based on supply logistics. The retail price is calculated from the depot price plus applicable taxes and transport margins.

This is why checking city-specific prices matters. The difference between two cities in the same state can be 1 to 3 rupees per litre.

The Role of IOCL, BPCL, and HPCL

India's fuel retail market is dominated by three public-sector OMCs, all majority-owned by the Government of India.

• Indian Oil Corporation Limited (IOCL) — The largest, operating roughly 34,000 fuel stations across India. IOCL controls about 42% of the retail market and also operates India's largest refining network.
• Bharat Petroleum Corporation Limited (BPCL) — Runs approximately 21,000 outlets. BPCL has a strong presence in southern and western India and is known for its MAK lubricant brand.
• Hindustan Petroleum Corporation Limited (HPCL) — Operates around 21,000 stations. HPCL has a particularly strong retail network in western India and operates two major refineries in Mumbai and Visakhapatnam.

While the three OMCs technically set prices independently, in practice their prices are nearly identical — usually within 5 to 20 paise of each other in any given city. This is because all three use the same trade parity formula benchmarked against international product prices. Private players like Reliance-BP (Jio-bp) and Nayara Energy (formerly Essar Oil) also operate retail stations, but their combined market share remains under 10%.

Recent Price Trends

After a prolonged freeze in retail prices during much of 2022 and early 2023 — a period when the government absorbed losses through reduced excise duty — prices were allowed to adjust more freely from mid-2023 onward. Through 2024 and into 2025, the dynamic daily pricing mechanism resumed functioning more normally, with small daily adjustments of 5 to 25 paise per litre reflecting international crude movements.

In 2026, prices have remained relatively stable owing to moderate crude oil prices in the $70 to $85 per barrel range and a reasonably steady rupee. However, any significant geopolitical disruption — particularly in the Middle East or related to OPEC+ production decisions — could push prices sharply higher. You can track the latest movement on our national petrol price tracker and diesel price tracker.

Alternatives: CNG and Electric

With fuel taxes making up nearly half the pump price, many Indian drivers are exploring alternatives. CNG (Compressed Natural Gas) has become a popular choice in cities like Delhi, Mumbai, Ahmedabad, and Pune, where pipeline infrastructure makes it widely available. Running costs for CNG are roughly 60% lower per kilometre than petrol. You can read our detailed CNG vs petrol vs diesel comparison for a full cost breakdown.

Frequently Asked Questions

Why is petrol cheaper in Rajasthan than in Maharashtra?

While Rajasthan's base VAT rate is not the lowest in India, the total tax burden including surcharges and local body taxes tends to be lower than Maharashtra's. Mumbai in particular has additional local body taxes that push prices even higher. States like Goa, Andaman and Nicobar, and several northeastern states have lower effective tax rates and therefore cheaper fuel. The difference between the cheapest and most expensive cities can be over 10 per litre.

When do fuel prices change in India?

Prices are revised daily at 6:00 AM IST by IOCL, BPCL, and HPCL. The new prices apply immediately at all retail outlets. Changes are typically small — 5 to 25 paise per litre per day — but can accumulate significantly over weeks or months. There is no fixed direction: prices can go up, down, or remain unchanged on any given day.

Who decides fuel prices in India?

Technically, the three public-sector OMCs (IOCL, BPCL, HPCL) set retail prices based on a trade parity formula linked to international product prices. In practice, the central government exerts significant influence through excise duty adjustments and informal guidance — prices were effectively frozen for extended periods in 2022 despite volatile crude markets. State governments control the VAT component.

Why is diesel cheaper than petrol in India?

Two reasons. First, the central excise duty on diesel (around 15.80 per litre) is lower than on petrol (around 19.90 per litre). Second, many states levy a slightly lower VAT rate on diesel than on petrol. This was a deliberate policy choice because diesel is considered an essential fuel for agriculture, transport, and industry.

Will petrol and diesel come under GST?

This has been discussed for years but faces strong resistance from state governments. Fuel taxes are a major revenue source for states — bringing petrol and diesel under GST would cap the rate at 28% (the highest GST slab) and eliminate the surcharges and cesses that currently push effective rates much higher. Until states agree to forgo this revenue, GST coverage for fuel is unlikely. If it were implemented, prices would drop significantly in high-tax states and converge across the country.

How can I check fuel prices in my city?

You can check today's petrol prices across 750+ Indian cities on CheapestFuelFinder.com. We update prices daily using official OMC data from IOCL, BPCL, and HPCL. You can also compare diesel prices and CNG prices across all available cities.