Why Fuel Pump Queues Are Growing Across India Again

Key Insights 

1. India's government says the nation has “more than sufficient” stockpiles of petrol and diesel, claiming that localised pressure at fuel stations is the result of industrial consumers buying fuels through retail markets instead of bulk suppliers. 
    
2. An assessment carried out with state chief secretaries and FICCI & CII revealed no proof of any shortages of fuels, and according to the ministry, “there is no shortage of any petroleum products; however, there is an occasional practice of arbitrage which creates such an illusion.” 

While it may appear that there is a fuel shortage in your area, this is not true. 

State-owned oil marketing firms are currently making losses of about ₹550 crore per day by selling petrol, diesel, and domestic LPG in order to shield consumers from fluctuations in prices related to tensions in West Asia. 

However, the distortion occurs in the fact that the industrial purchasers exploit these discounts by switching from the expensive bulk route to the relatively cheaper retail route.

The burden falls on consumers through long queues and fuel shortages, among others in the short run. 

If the price difference between the two continues, then this distortion will become even greater in the long run.

The Pricing Gap That Is Driving the Problem

The table below explains how the current dual-price structure creates the conditions for arbitrage at India's fuel pumps.
 

Keeping retail diesel prices below market level while bulk consumers pay market-linked rates creates a direct arbitrage opportunity. 

The wider the price gap, the stronger the financial incentive to misuse the retail channel. 

Enforcement is inherently difficult. A commercial truck at a retail pump does not always appear suspicious.

Farmers, Households, and Small Businesses Are Taking a Hit

The central government is requesting states and Union Territories to set up dedicated squads for enforcing strict action against.

Hoarding, black marketing, unauthorised stocking, and diversion of petroleum products through the provisions of the Essential Commodities Act. The relief is much-needed for sincere retail customers.

Fuel Production Was Good Enough in FY26

India had enough fuel production capacity, producing 243.2 million tonnes worth of fuel, even as 61.5 million tonnes of the product were exported in FY26. 

This indicates India’s actual situation of fuel production, which was quite healthy despite all the problems faced recently. The Week

Analysts See the Problem Rooted in Pricing, Not in Arrests

According to critics, the entire arbitrage problem is self-created through policies because it cannot be stable to have lower retail prices than market prices and expect industrial buyers to pay higher prices voluntarily. 

The government’s stance on this matter is that lower pricing is an intentional measure for protecting households, farmers, and customers in general.

More Than 23,250 Raids Carried out So Far

Uttar Pradesh alone has raided more than 23,250 times and filed FIRs against 238 cases since March 2026 and arrested offenders. 

Although enforcement raids have helped the government to some extent, they cannot be a solution to solve the fundamental issue. business-standard

Conclusion

India has enough fuel it is the question of the buyer of the fuel. Enforcement measures might help in curbing the diversion of products, but the fundamental problem has to be solved by narrowing down the bulk-retail price gap.