War in West Asia became the justification; taxation, corporate protection and fiscal extraction were already the architecture.
By Ramphal Kataria
Abstract
The sudden increase of petrol and diesel prices in India by nearly ₹7.5–₹8 per litre within merely eleven days in May 2026 has officially been attributed to the Iran–Israel–US conflict and the resulting volatility in global crude oil markets. However, the present essay argues that the war merely acted as an immediate trigger rather than the foundational cause of the crisis. Through a materialist critique of state policy and political economy, the essay demonstrates how fuel pricing in India has increasingly become a mechanism of fiscal extraction from the masses while simultaneously safeguarding corporate profitability and state revenues.
The essay examines the contradiction between the government’s claims of oil marketing companies suffering losses of nearly ₹1,000 crore per day and the extraordinary annual profits exceeding ₹77,000 crore earned by public sector oil corporations. It further analyses the steady increase in excise duties and indirect taxation since 2014 despite prolonged periods of low international crude oil prices. The paper compares the economic trajectories of the 2004–2014 and 2014–2026 periods in relation to GDP growth, welfare expenditure, corporate concentration, foreign capital dependence, and the burden imposed upon ordinary citizens.
The Politics Behind the Petrol Pump
The sudden rise of petrol prices in India by nearly ₹7.5 to ₹8 per litre within merely eleven days in May 2026 has been officially justified in the name of the Iran–Israel–US conflict and the surge in international crude oil prices. The Union Government, along with petroleum officials and oil marketing companies, has repeatedly argued that the extraordinary geopolitical crisis in West Asia forced them to pass the burden onto consumers.
However, a deeper political-economic analysis reveals that the war is only the immediate trigger, not the structural cause. The roots of the crisis lie in a longer trajectory of taxation policy, corporate profit protection, fiscal priorities, and the neoliberal restructuring of the Indian economy over the last decade.
Table 1: Petrol Price Increase in Eleven Days (May 2026)
Date | Increase in Petrol Price | Cumulative Increase |
15 May 2026 | ₹3.00/litre | ₹3.00 |
19 May 2026 | ₹0.90/litre | ₹3.90 |
23 May 2026 | ₹0.88/litre | ₹4.78 |
26 May 2026 | ₹2.61/litre | ₹7.39–₹8.00 |
The official narrative suggests that India had “protected” consumers for 76 days while oil marketing companies suffered losses of nearly ₹1,000 crore per day. Petroleum Minister Hardeep Singh Puri and Finance Minister Nirmala Sitharaman defended the hikes by citing the West Asian conflict, disruption in the Strait of Hormuz, and the need to preserve fiscal stability.
Yet this explanation becomes questionable when examined against the actual financial performance of state-owned oil companies and the taxation policies pursued since 2014.
“The war became the headline; taxation was the real story.”
The contradiction is glaring. Even while the government claimed that oil companies were suffering unbearable losses, the three major state-owned oil marketing corporations — Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited — collectively recorded annual profits exceeding ₹77,000 crore, with quarterly profits rising by nearly 41 percent.
Table 2: Profitability of Oil Marketing Companies
Company | FY 2025–26 Performance |
Indian Oil Corporation | Massive refining and retail profits |
Bharat Petroleum Corporation Limited | Strong quarterly growth |
Hindustan Petroleum Corporation Limited | Significant increase in net earnings |
Combined Annual Profit | ₹77,000+ crore |
Q4 Growth | Approx. 41% increase |
The very companies presented as victims of global oil volatility were simultaneously generating enormous profits through refining margins, inventory gains, and state-protected pricing structures. This exposes the selective political use of “loss” as a narrative weapon. Losses are socialized through price hikes, but profits remain corporatized.
“Losses are nationalized, profits are corporatized.”
The reality is that the Indian consumer has been paying inflated fuel prices for years even when global crude oil prices had fallen sharply. Between 2014 and 2020, international crude prices frequently declined to historically low levels. During the COVID-19 pandemic, crude even briefly traded below zero in some futures markets. Yet Indian retail fuel prices did not witness proportional reductions. Instead, the Union Government repeatedly increased excise duties on petrol and diesel.
Table 3: Rise in Central Excise Duty on Petrol
Year | Approximate Excise Duty on Petrol |
2014 | ₹9.48/litre |
2016 | ₹21.48/litre |
2020 | ₹32.90/litre |
2022 | Reduced partially before elections |
2024–2026 | Continued high tax structure |
Under the United Progressive Alliance government led by Manmohan Singh, petrol prices were politically sensitive and closely tied to global crude movements. The UPA period between 2004 and 2014 saw high crude prices globally, often crossing $100 per barrel, yet retail petrol prices remained comparatively moderated due to subsidy mechanisms and lower indirect taxation.
During this period, central excise duty on petrol largely remained in the range of ₹9 to ₹10 per litre.
However, after 2014, under Prime Minister Narendra Modi, excise duties were repeatedly raised whenever international crude prices declined. By 2020–21, central excise on petrol had risen to nearly ₹32.90 per litre and diesel to around ₹31.80 per litre.
Instead of transferring the benefits of cheaper crude oil to consumers, the state absorbed the gains through taxation.
“When crude prices fell, taxes rose. When crude prices rose, citizens paid again.”
This is the core contradiction of the present argument. When crude prices fell between 2015 and 2020, taxes were not reduced proportionately. But when crude prices rose in 2026, the burden was immediately transferred to consumers. In other words, the state privatized gains during low-price periods and socialized losses during high-price periods.
Table 4: Global Crude Oil vs Indian Petrol Prices
Year/Period | Brent Crude Oil Price | Delhi Petrol Price |
2014 | ~$105/barrel | ~₹71/litre |
2020 | ~$20–40/barrel | ~₹80–90/litre |
2024 | ~$80/barrel | ~₹94.74/litre |
Early 2025 | ~$60–70/barrel | ~₹94–95/litre |
May 2026 | ~$96–114/barrel | ₹102.12/litre |
From a political economy perspective, fuel pricing in India increasingly reflects the logic of fiscal capitalism rather than welfare economics. Petrol and diesel taxation became one of the most dependable sources of government revenue. The central government collected lakhs of crores through excise duties over the last decade.
Fuel taxes financed fiscal deficits, infrastructure projects, and electoral welfare announcements without requiring direct taxation on corporate wealth or the richest classes.
“Fuel pricing in India no longer reflects energy economics alone; it reflects the politics of revenue extraction.”
The repeated appeals for austerity directed at ordinary citizens therefore carry a deeply unequal moral character. Citizens are told to reduce consumption, prepare for sacrifice, and understand “national compulsions,” while corporate profits remain protected.
The government’s “3Fs” formulation — fuel, fertiliser and forex — reveals anxiety not merely about energy prices but about the fragility of India’s external economic structure.
India imports more than 85 percent of its crude oil requirements. This dependency creates permanent vulnerability in times of geopolitical conflict. But the vulnerability has deepened because the broader economic model increasingly depends on volatile foreign capital inflows, speculative investments, and global financial confidence.
The withdrawal of foreign institutional investment during periods of global uncertainty places immense pressure on India’s foreign exchange reserves and the rupee. Simultaneously, large Indian corporations continue investing abroad, purchasing foreign assets, expanding international operations, and moving capital outward.
Thus, while ordinary citizens are asked to bear higher fuel prices in the name of “national interest,” capital itself remains globally mobile and insulated.
“Austerity is demanded from the poor while capital remains globally mobile and politically protected.”
This reflects a broader transformation in the Indian economy after 2014: the strengthening of corporate-led growth combined with increasing informalization of labour, reduction in welfare protections, privatization, and indirect taxation. The burden of state revenue generation shifted steadily from direct taxation on wealth toward indirect taxation on mass consumption.
Fuel taxes became the clearest example of this shift because they affect transportation, food inflation, agriculture, logistics, and every sphere of daily life.
Table 5: Comparative Economic Trajectory — 2004–2014 vs 2014–2026
Parameter | 2004–2014 (UPA Era) | 2014–2026 (NDA Era) |
Average GDP Growth | 7–9% in peak years | Initial rise, later slowdown |
Welfare Expansion | MGNREGA, RTI, Food Security | Welfare increasingly centralized |
Fuel Subsidy Approach | Partial consumer protection | Market-linked pricing |
Excise Duty Structure | Comparatively moderate | Aggressive increase |
Informal Economy | Relatively stable | Hit by Demonetisation & GST |
Corporate Concentration | Limited | Significant consolidation |
Public Sector Orientation | Stronger | Privatization push |
Inflation Burden | Shared through subsidy | Shifted to consumers |
Forex Vulnerability | Lower dependence | Higher FII sensitivity |
The contrast between the two economic periods — 2004 to 2014 and 2014 to 2026 — is therefore significant.
Between 2004 and 2011, India witnessed some of its highest GDP growth years, often ranging between 7 to 9 percent annually. This period combined public expenditure, rural employment expansion, agricultural support, and rising domestic demand. Major welfare interventions such as MGNREGA, the Right to Education, forest rights legislation, and food security mechanisms emerged during this period.
Despite corruption scandals and policy contradictions, the growth model retained significant redistributive features.
After 2014, GDP growth initially remained stable but increasingly became dependent on centralized state expenditure, financialization, and corporate concentration. Demonetisation in 2016 severely damaged the informal economy. The GST regime further centralized fiscal power while burdening small businesses. The COVID-19 pandemic deepened inequality dramatically.
Table 6: GDP Growth Trajectory (Approximate)
Year | GDP Growth Rate |
2004–05 | 7% |
2005–06 | 9.5% |
2006–07 | 9.6% |
2007–08 | 9.3% |
2008–09 | 3.1% |
2009–10 | 8.5% |
2010–11 | 10.3% |
2011–12 | 6.6% |
2012–13 | 5.5% |
2013–14 | 6.4% |
2014–15 | 7.4% |
2015–16 | 8.0% |
2016–17 | 8.2% |
2017–18 | 7.0% |
2018–19 | 6.1% |
2019–20 | 4.0% |
2020–21 | -6.6% |
2021–22 | 8.7% |
2022–23 | 7.2% |
2023–24 | 6.8% |
2024–25 | 6–6.5% |
2025–26 | Under pressure due to energy inflation |
Although headline GDP figures recovered statistically after 2021, employment generation remained weak and consumption inequality widened.
The year-wise trajectory reveals this contradiction clearly: growth increasingly became concentrated without corresponding social security expansion. Economic growth survived statistically, but purchasing power weakened materially for large sections of the population.
“The Indian citizen subsidizes both the state’s fiscal deficit and the oil companies’ profitability.”
Thus, the fuel price crisis cannot be understood merely as the outcome of the Iran–Israel–US war. The war accelerated an already fragile structure built upon heavy fuel taxation, external dependency, corporate protection, and fiscal extraction from ordinary citizens.
The irony is profound. During periods of low crude prices, consumers were denied relief in the name of fiscal necessity. During periods of high crude prices, they are denied relief again in the name of geopolitical crisis.
The citizen pays in both scenarios.
Conclusion
The fuel price crisis of May 2026 is not merely a consequence of the Iran–Israel–US conflict. The war accelerated pressures that were already structurally embedded within India’s political economy. Over the last decade, falling global crude prices did not bring proportionate relief to citizens because the state transformed fuel taxation into one of its largest instruments of revenue extraction. When crude prices rose again, the same burden was swiftly transferred onto the masses.
The crisis therefore exposes a deeper transformation of governance itself. Economic nationalism increasingly demands sacrifice from ordinary citizens while insulating corporate profitability and protecting fiscal priorities. Public suffering is normalized through patriotic rhetoric, while structural inequality deepens through indirect taxation and inflation.
The contrast between the 2004–2014 and 2014–2026 periods reveals a broader shift from a partially redistributive economic framework toward a centralized corporate-fiscal order. Welfare has gradually become conditional, while market discipline has become unconditional for the public.
The Indian fuel crisis is therefore not only about petrol. It is about the political choice of who bears the cost of economic instability. In contemporary India, the answer increasingly appears to be: the ordinary citizen.
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