The government has approved a Rs23 billion subsidy to oil marketing companies (OMCs) to maintain current prices for petrol and high-speed diesel (HSD) for the week ending March 20, 2026. Without this intervention, petrol and HSD prices would have increased by more than Rs49 and Rs75 per litre, respectively, effective March 14.
Kerosene Price Surge
Concurrently, the price of kerosene oil has risen by another Rs40 per litre, bringing the total cost to Rs358 per litre. This represents a cumulative increase of 90% from Rs188.87 earlier in March. Kerosene has now become the most expensive consumer fuel product.
Government Intervention and Funding
The petroleum division of the energy ministry stated that the government will cover a price differential of Rs75.05 per litre for HSD and Rs49.63 per litre for petrol. The Oil and Gas Regulatory Authority (OGRA) will administer the Rs23 billion subsidy. Funds will be drawn from the newly created ‘Prime Minister’s Austerity Fund’, which received an allocation of Rs27.1 billion from the Economic Coordination Committee (ECC).
Recent Price History and Usage
This latest increase follows a previous rise in kerosene prices last week, which saw a nearly 70% jump from Rs130.08 to Rs318.81 per litre. Kerosene is primarily used in remote areas lacking access to liquefied petroleum gas (LPG). The government notes that a previous price gap between kerosene and petrol had been exploited for illicit mixing and profiteering, a practice now mitigated by the price adjustments.
Levies and Consumption
The government maintains existing petroleum levies: Rs55.24 per litre on diesel and Rs105.37 per litre on petrol, alongside a Rs2.50 per litre climate support levy. Additional duties and inland fuel equalisation margins also apply. Petrol and HSD account for the vast majority of fuel sales, with monthly volumes of 700,000 to 800,000 tonnes, compared to just 10,000 tonnes of kerosene.
Frequently Asked Questions
What is the current price of kerosene?
The current price of kerosene is Rs358 per litre.
How much is the government subsidizing petrol and diesel?
The government is paying Rs75.05 per litre on HSD and Rs49.63 per litre on petrol to maintain current prices.
Where will the funds for the subsidy come from?
The funds will be drawn from the ‘Prime Minister’s Austerity Fund’, which received Rs27.1 billion from the ECC, with Rs23 billion transferred to OGRA.
As the government navigates fluctuating global energy prices, how might these subsidy measures impact long-term fiscal planning and energy sector investment?
