Who decides petrol and diesel prices in India?

Who Decides?

On 16 October 2026, a litre of petrol cost Rs 102.12 in Delhi, Rs 107.77 in Chennai, Rs 111.21 in Mumbai and Rs 113.51 in Kolkata, according to the Petroleum Planning & Analysis Cell (PPAC), an agency of the petroleum ministry. Diesel ranged from Rs 95.20 to Rs 99.82. The gap between Delhi and Kolkata was Rs 11.39 a litre for the same fuel. So who decides what a litre costs, and which part of that price is whose decision?

Retail prices at Indian Oil outlets from PPAC's metro-city series, posted 16 October 2026. Prices can be revised any day, so treat these figures as a dated snapshot.

What is the short answer?

The pump price is set by the oil marketing companies (OMCs), chiefly the state-owned Indian Oil, Bharat Petroleum and Hindustan Petroleum. Their price is only one part of what you pay. The Union sets central excise duty, the pump owner earns a dealer commission, and state governments levy VAT. Customs duties on imports can also affect upstream costs. Petrol and diesel are outside the Goods and Services Tax (GST), so the usual single national tax does not apply to them.

The price therefore reflects two kinds of decision. The oil company sets its part of the price and can revise it as often as every day. The Union and the states set the taxes, which change only by notification or legislation.

Who decides the base price?

The government used to fix these prices. According to a Lok Sabha reply of 10 February 2022, petrol was deregulated with effect from 26 June 2010 and diesel was made market-determined from 19 October 2014. Since then, the public-sector OMCs have set prices based on international prices and market conditions. A later Lok Sabha reply of 13 February 2025 repeats the rule: the companies decide, taking into account crude oil and product prices, the exchange rate, taxes, freight and insurance, and the prices are "not linked to election schedules".

In practice the three companies revise prices on their own schedule. They moved from fortnightly to daily revisions from 16 June 2017, but PPAC's series shows long stretches without a change. Delhi petrol stayed between Rs 94.72 and Rs 94.77 from 15 March 2024 until 14 May 2026.

What does one litre in Delhi contain?

Parliament's reply of 13 February 2025 broke down a Delhi litre on 7 February 2025. It is the clearest official breakdown available, so it appears here as a dated illustration of the structure, not a current price.

In that parliamentary breakdown, petrol’s price before these duties was Rs 54.13. The reply lists Rs 0.95 of customs duty and Rs 19.90 of excise, a combined Rs 20.85, giving a depot price of Rs 74.98. The dealer commission added Rs 4.39, and Delhi's VAT, charged at 19.4% on the depot price plus commission, added Rs 15.40, for a pump price of Rs 94.77. Taxes together were Rs 36.25, or about 38% of the pump price.

The order matters. VAT is calculated on a price that already contains the Union's duty and the dealer's margin, so a change in excise also changes the VAT paid. Suppose excise is cut by Rs 10 a litre: Delhi's 19.4% VAT then applies to a base that is Rs 10 lower, and the VAT falls by about Rs 1.94. Other states combine percentages with fixed per-litre amounts, so the effect differs.

The same structure appears in current price sheets. Bharat Petroleum's Delhi price build-up effective 1 October 2026 lists petrol at Rs 81.12 (the price charged to dealers, excluding VAT), plus an average dealer commission of Rs 4.41 and VAT of Rs 16.59, for Rs 102.12. Its diesel build-up gives Rs 78.30, plus Rs 2.99 of dealer commission, plus Rs 13.91 of VAT and an air ambience charge, for Rs 95.20. The first line bundles the oil company's price, freight and Union duties, so these 2026 documents do not split them as the 2025 reply did.

Who levies which tax?

The Constitution divides the powers. Entry 84 of the Union List lets the Union levy duties of excise on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel. Entry 54 of the State List lets states tax the sale of the same fuels, other than sales in the course of inter-State or international trade. The Union's duty is therefore a rupee amount per litre that is the same across the country. The state tax is a separate levy on sale, and each state chooses its own rate.

The Union changes its rate by notification. On 26 March 2026, Central Excise Notification 05/2026 set the special additional excise duty at Rs 3 per litre on petrol and nil on diesel. The government's announcement, a PIB release of 27 March 2026, described the step as a Rs 10 per litre cut on both fuels. PPAC's tariff table, posted the same day and as checked on 22 October 2026, lists excise components that add up to Rs 11.90 a litre on petrol and Rs 7.80 on diesel. The Union can revise these rates at any time, so check that table for the current figure.

Article 270(1) also says surcharges and cesses levied for specific purposes are not part of the Union taxes shared with the states. The PPAC table labels several Union components as cesses or additional duties, so the headline excise total is not the amount that states share in.

Why is fuel outside GST?

GST replaced most indirect taxes in 2017, but the Constitution treats petrol and diesel differently. Article 279A(5) says the GST Council "shall recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel". Until the Council recommends a date, excise and state sales tax continue.

In a 2021 parliamentary reply published by PIB, the petroleum ministry said the Council "has not made any recommendation" to include these goods. At its 45th meeting on 17 September 2021, the Council did not bring them in; Finance Minister Nirmala Sitharaman said most members opposed the move and that it "wasn't the right time". The Council must recommend a date before GST can apply to these fuels.

Why do states charge different prices?

Every state sets its own rate, so VAT is one reason a Delhi litre and a Kolkata litre diverge. PPAC's state table, posted 12 August 2026, shows the range for petrol: 1% in the Andaman and Nicobar Islands, 10% in Lakshadweep, 19.40% in Delhi, and 35.20% in Telangana. Many states combine percentages with fixed per-litre amounts. Tamil Nadu charges 13% plus Rs 11.52 a litre; Maharashtra 25% plus Rs 5.12 a litre; West Bengal 25% or Rs 13.12 a litre, whichever is higher, plus a cess. The percentages are therefore not directly comparable. In several states, including Delhi, VAT is also charged on the dealer commission.

City gaps also reflect differences in freight and local charges, so not all of the difference between two cities is VAT. The Union's duty, by contrast, is the same everywhere, which makes VAT the line where state policy differs most directly.

In 2026, why did an excise cut not lower pump prices?

In March 2026 the Union cut excise by Rs 10 a litre, but, according to the PIB release, the saving did not reach pump prices. PIB said crude had risen from about 70 dollars to about 122 dollars a barrel in about a month and that the oil companies were absorbing under-recoveries of about Rs 26 a litre on petrol and Rs 81.90 on diesel, so the excise cut reduced their losses instead. A tax change and a price change are separate decisions.

Prices then rose in steps. In PPAC's series, Delhi petrol went from Rs 94.77 to Rs 97.77 on 15 May 2026, then to Rs 98.64, Rs 99.51 and finally Rs 102.12 from 25 May 2026. Delhi diesel rose from Rs 87.67 to Rs 95.20 over the same dates. That is an increase of Rs 7.35 a litre on petrol and Rs 7.53 on diesel, and both prices were unchanged through 16 October 2026.

Who decides each part of the price?

To check your own city, the most reliable sources are the oil company's current price build-up, such as BPCL's Delhi sheet, and PPAC's state table for the VAT rate. Questions about excise belong with the Finance Ministry; questions about VAT belong with your state's finance or taxation department.

LPG cylinders and CNG follow different rules. To see who decides another everyday price, read who decides electricity tariffs, where a state regulator issues an order.

Cover photo: Indian Oil fuel station in Marthandam by Manukrishnan80, taken 24 November 2025, CC BY-SA 4.0, via Wikimedia Commons. Cropped, with number plates blurred.