Oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — are currently losing Rs. 4 a litre on petrol, Rs. 14 on diesel and Rs. 390 on every cylinder of liquefied petroleum gas (LPG).
Global crude oil prices touched $120.7 per barrel on Monday — the highest since June last year because of geopolitical tensions over key producer Iran, which meets 12% of India's needs.
An informal government diktat to the oil companies to hold the prices till the elections in five states had so far prevented a hike despite global oil rates climbing for the past two months.
Senior Indian Oil officials said the company was going through the "most difficult phase" and anticipated heavy losses.
"There is no alternative but to increase the prices," a senior official said.