Reserve Bank of India (RBI) Governor Sanjay Malhotra has warned that India may be compelled to raise petrol and diesel prices if the Middle East conflict continues to push global crude oil costs higher. Speaking at a conference co-hosted by the Swiss National Bank and the International Monetary Fund (IMF) in Switzerland on Tuesday, Malhotra said a retail fuel price revision is "a matter of time" should the West Asia crisis persist.

RBI's Inflation Balancing Act

The Governor underscored that surging energy costs are testing India's flexible inflation targeting framework, and may necessitate policy intervention. "We are being more and more data dependent. The RBI is being flexible in its approach and is ready to look through the shock if it is transitory, but if it is entrenched, we need to take action," Malhotra said.

The RBI's Monetary Policy Committee (MPC) unanimously held the repo rate at 5.25% in its April 2026 meeting, maintaining a neutral stance in a deliberate "wait and watch" approach to balance robust domestic growth against rising inflationary pressures. The central bank's next policy review is scheduled for June 5, when the MPC will reassess key interest rates.

Oil Companies Absorbing Mounting Losses

Petroleum Minister Hardeep Singh Puri confirmed that state-run oil marketing companies are incurring losses of nearly ₹1,000 crore per day because retail fuel prices have not been revised despite global crude oil prices crossing $100 per barrel. Puri noted that cumulative under-recoveries have reached ₹1.98 lakh crore, while losses for the current June quarter alone stand at nearly ₹1 lakh crore.

The minister, while assuring that petrol, diesel, and LPG stocks remain adequate, hinted that a price revision may be unavoidable given the scale of losses. He added that excise duty reductions had been deployed as a partial buffer, and public sector oil companies have been absorbing the remainder of the global price surge.

India's Crude Oil Vulnerability

India imports approximately 88% of its crude oil requirement, making it acutely sensitive to global price swings. Any sustained rise in international crude costs translates directly into higher production costs for petrol, diesel, and LPG, with downstream effects on transportation and consumer prices across the economy.

To ensure supply security, Puri said India currently holds crude stocks equivalent to around 76 days of demand. LPG production has also been ramped up to 55,000–56,000 tonnes from approximately 35,000 tonnes earlier, aimed at ensuring uninterrupted domestic supply.

What Happens Next

A fuel price revision, if implemented, would likely trigger a broader inflationary wave — raising transportation costs and squeezing household budgets. The RBI's June 5 policy meeting will be closely watched for signals on whether the central bank shifts from its current neutral stance toward a tightening posture. Analysts note this is a pivotal juncture: the longer the government delays a price correction, the larger the eventual shock to consumers and inflation metrics.