Energy Policy Explained

Petrol prices were decontrolled in June 2010 and diesel prices in October 2014. Oil marketing companies set retail prices. The Central Government levies excise duty and states levy VAT, so taxes make up a large part of the pump price.

Market-linked pricing is meant to reflect international costs and avoid open-ended subsidies. Taxes on fuel are a major source of revenue for the Centre and the states.

Oil marketing companies (Indian Oil, BPCL, HPCL and private retailers). The Ministry of Finance sets excise duty; state governments set VAT.

On 27 March 2026 excise duty on petrol and diesel was cut by ₹10 per litre. The release says the cut offset under-recoveries of the oil marketing companies while pump prices stayed the same (PIB). A parliamentary reply in August 2025 noted that India imports more than 85% of its crude (PIB).

Prices are formally decontrolled, but retail prices have at times stayed unchanged while crude prices moved. How that affects company finances, public revenue and consumers depends on the period examined.

PPAC calculates import dependence as the share of domestic consumption met by net imports.

It is the main headline measure of exposure to external supply and price shocks.

Measured and published by PPAC, under the ministry.

Crude oil: 88.7% (FY 2025-26, provisional). Gas: 50.1%. Oil and gas combined: 80.7% (PPAC).

The measure counts crude imports that are refined and re-exported as products. Other definitions would give different figures.

Since April 2023, gas from older nominated fields (APM gas) has been priced at 10% of the monthly Indian crude basket, with a floor of US$4 and a ceiling that started at US$6.50/MMBTU and rises by US$0.25 a year.

To give producers a price linked to the market while shielding priority users, such as households and CNG, from spikes.

The Ministry of Petroleum and Natural Gas notifies the formula; PPAC publishes monthly prices.

September 2026: calculated price US$9.00; applicable ceiling US$7.00 per MMBTU (PPAC).

When the calculated price stays above the ceiling for long, the gap is borne somewhere in the system. How it is shared is not set out in the data reviewed here.

The National Policy on Biofuels (2018, amended 2022) set a target of 20% ethanol in petrol by ESY 2025-26.

To cut crude imports, support farm incomes and reduce emissions.

Oil marketing companies buy ethanol from distilleries at feedstock-specific prices set by the Government.

20.0% blending in ESY 2025-26 to August 2026 (PPAC). The ministry says the target has been achieved (PIB).

Effects on vehicle performance, food and water use, and life-cycle emissions remain debated. See Biofuels & Ethanol.

The Government holds crude oil in underground caverns for use in supply emergencies.

A buffer against supply disruption, which matters most for a country that imports most of its oil.

Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle under the ministry.

Phase I: 5.33 MMT at Visakhapatnam, Mangaluru and Padur, which the ministry describes as about 9.5 days of cover. Phase II (6.5 MMT at Chandikhol and Padur) was approved in July 2021 (MoPNG).

How full the reserves are at any time is not routinely published. Figures in the media have not been officially confirmed.

Pradhan Mantri Ujjwala Yojana (PMUY) provides LPG connections to low-income households.

To replace polluting cooking fuels such as firewood and dung with LPG.

The ministry funds the scheme; oil marketing companies deliver connections and refills.

10.57 crore PMUY connections, and 32.78 crore active domestic LPG consumers overall, as on 1 September 2026 (PPAC). LPG consumption fell 16.8% year-on-year in April–August 2026.

The number of connections does not show how often households refill. PPAC's headline tables do not report refill rates for PMUY households.

Under the Hydrocarbon Exploration and Licensing Policy (2016), companies can choose areas and bid for them in open-acreage rounds, under revenue-sharing contracts.

To attract investment into domestic exploration and raise production.

The Directorate General of Hydrocarbons runs the rounds; the ministry awards blocks.

172 blocks (3,78,652 sq km) have been awarded across nine rounds. The Oilfields (Regulation and Development) Amendment Act, 2025 introduced a “petroleum lease” (PIB).

Exploration results take years to show up in production. Domestic crude output was 28.0 MMT in FY 2025-26, compared with 28.7 MMT a year earlier.