Do You Know Who Decides The Petrol Prices In India?

The discovery of oil in 1867 in Digboi, Assam, marked the birth of the petroleum industry in India. Public sector undertakings (PSUs) like ONGC and Indian Oil Corporation have played a crucial role in exploration and refining. But today we are not exploring the history of the petroleum industry. This article will explore the maths behind the petrol prices in India.

Since independence and fast forward to 2025, India has witnessed an upward trend in the petrol prices. In 1947, petrol in India was approximately between Rs. 0.25 and Rs. 0.27 per litre. In 1970, the petrol price in India was around Rs. 0.90 per litre. In 1990, India saw petrol prices rise from around Rs. 4.20 per litre to over Rs. 12 per litre.

Moving further, the price of petrol in India by the end of 2004 was around Rs. 33.71 per litre. The year 2013 saw prices of petrol increase around double and was around Rs. 72.43 per litre. The price of petrol in India has been increasing, and today, in 2025, the price of petrol in India is between Rs. 94 and Rs. 107 per litre.

Now the question is, who sets the petrol prices in India? How is the price of petrol in India calculated? We will explore the answers to all these questions in this article. 

Who sets the petrol prices in India?

In India, the petrol prices are primarily decided by Public Sector Oil Marketing Companies (OMCs) like Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Limited (HPCL), and Indian Oil Corporation Limited (IOCL).

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How are petrol and diesel prices calculated in India?

The Oil Marketing Companies (OMCs) set the base price, freight charges, and dealer commission based on global crude oil rates using the Trade Parity Price (TPP) formula.

The central government then levies Excise Duty which is a fixed amount per litre. The state governments further levy Value Added Tax (VAT) which varies from state to state, causing price differences.

Earlier, the petrol prices were decided by the Ministry of Petrolelum and Natural Gas (MoPNG). But the government deregulated the pricing of petrol in 2010 and diesel in 2014. This system allowed oil marketing companies to determine the price of petrol and diesel. Since 2017, the prices of petrol are revised daily due to 'dynamic daily price model' to reduce volatility.

It is to be noted that 84 per cent of crude oil is imported which makes the retail prices of petrol and diesel and international crude oil prices correlated. Now the global prices are in dollars, so the value of rupee against dollar also plays a contributing factor in the calculation of petrol and diesel prices.  

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