State-owned oil marketing companies (OMCs) on Monday  hiked retail prices of petrol and diesel to pass on the increase in the international oil rates to consumers, apparently going back to the daily price revision mechanism that has been on hold since April 24.

This development, which coincided with the run-up to the Karnataka assembly elections, has brought to the fore an evergreen debate: does the government continue to interfere in the pricing of petrol and diesel despite deregulation?

Petrol and diesel prices in Delhi were hiked by 17 and 21 paise per litre respectively. Following that, petrol is selling at Rs 74.80 a litre, while diesel at Rs 66.14 a litre.

Global oil prices rallied sharply after Donald Trump withdrew the US from the Iran nuclear deal on May 8 and vowed to reimpose sanctions on the Persian Gulf country, fueling concern of shrinkage in crude oil supply.

Retail pricing of petrol and diesel has been deregulated and the OMCs are free to revise prices in keeping with the movement in the international market.

However, OMCs kept price revision on hold, apparently on the petroleum ministry’s diktat, absorbing under-recoveries on sales of petrol and diesel on their own balance sheets to save the ruling party from embarrassment.

Petrol and diesel prices were last revised on April 24 when they were hiked by 13 paise each. But prices were frozen thereafter. This was despite benchmark international rates for petrol going up from $78.84 per barrel, which was used for raising the price to Rs 74.63 a litre on April 24, to $82.98 now, sources said.

The benchmark international diesel rates have since climbed from $84.68 per barrel to $88.63. Also, the rupee has weakened to Rs 67 per US dollar from Rs 66.62, making imports costlier.

The ministry has, however, denied that it has asked OMCs to go slow on the price hike.

OMCs shifted to daily price revision mechanism last June, from the fortnightly rate change dispensation that was in place earlier.

Now that Karnataka election is out of the way, OMCs might go for a sharp increase in petrol, diesel prices to make up for the losses incurred since April 24.

India’s petrol, diesel prices are among Southeast Asia’s highest due to high taxes, which make up for nearly 40-45% of the final retail price.

Prices at the OMCs’ petrol pumps were cut by 1-3 paise every day in the first fortnight of December 2017 before Gujarat went to polls.

They started moving up immediately after polling for assembly elections in Gujarat concluded on December 14, leading to speculation that government may have asked oil companies to hold the prices.