Petrol Diesel Price Hike: Big news for everyone. Brokerage firm JM Financial believes the government may increase excise duty on petrol and diesel by Rs 3 to Rs 4 per liter before the Union Budget on February 1. According to the report, oil marketing companies (OMCs) are currently generating substantial profits, while fiscal pressure on the central government is mounting. In this context, increasing fuel taxes could be an easy and effective option for the government.

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JM Financial stated that if Brent crude prices remain around $72 per barrel, the normal gross marketing margin (GMM) on auto fuel is around Rs 3.5 per liter. However, the current spot price of Brent crude is around $61 per barrel, leading to higher margins for OMCs. Currently, the GMM is estimated at around Rs 10.6 per liter, while the integrated gross margin is around Rs 19.2 per liter, well above the historical average. This leaves the government with room to increase taxes.

Regarding the fiscal situation, economists at JM Financial say that government revenues in FY26 are lagging behind budget estimates. Revenue receipts between April and November 2025 were only 56% of budget estimates, compared to 60% in the same period last year. There are also signs of tax collections slowing. Meanwhile, government capex remains strong, reaching Rs 6.58 lakh crore between April and November. Furthermore, nominal GDP growth for FY26 is projected to be around 8%, making achieving the fiscal deficit target of 4.4% challenging.

JM Financial estimates

JM Financial estimates that if the excise duty on petrol and diesel is increased by Rs 3– Rs 4 per litre, the government can get additional revenue of Rs 50,000 to Rs 70,000 crore annually. According to the report, every Rs 1 per litre increase increases the government’s income by around Rs 17,000 crore annually. However, this may impact the profits of OMCs. The brokerage has maintained SELL rating on HPCL, while REDUCE rating on IOCL and BPCL. JM Financial believes that the current high margins are difficult to sustain in the long run and investors should be cautious in oil company stocks.