Petrol and diesel will cost Rs.2.35 and Rs.0.50 more per litre, excluding state taxes, from midnight Saturday, state-run Indian Oil Corporation (IOC) announced.
The IOC said that it had to hike prices due to sharp depreciation of the rupee and hardening of crude prices in the international market due to the volatile situation in Syria.
The Indian rupee has lost more than 25 percent against the dollar since the beginning of the financial year. On Aug 28, 2013, the partially-convertible rupee touched a new record low of 68.80 against the dollar.
Concerns have been raised over escalation in tensions in Syria with a possible US intervention and, thereafter, the fallout on oil prices. India currently, imports almost 79 percent of its total crude oil requirements.
"Currently, the rupee-dollar exchange rate continues to be extremely volatile. Also the geopolitical situation in the Middle-East is leading to pressure on international oil prices as well," the IOC said in a statement.
"In view of these conditions, movement of prices in international oil markets and rupee-dollar exchange rate is being closely monitored and subsequent price changes will reflect developing trends of the market."
The three state-owned oil marketing companies (OMCs) had last raised prices of petrol and diesel by Rs.0.70 and Rs.0.50 more per litre, respectively on Aug 1, 2013.
In Delhi, the petrol price would increase to Rs.74.10 per litre while diesel would increase to Rs.51.97 per litre.
Similarly, in Mumbai, Chennai and Kolkata, petrol would now be priced at Rs.81.57, Rs.77.48 and Rs.81.57 per litre respectively. For diesel, the upward revision would result in prices of Rs.58.86, Rs.55.37 and Rs.56.33 per litre in the three cities respectively.
IOC further said that even after the current increase, under-recovery on retail diesel would be Rs.12.12 per litre. OMCs have been authorised by the government to increase the selling price of diesel within a small range every month.
Currently, the government subsidies the retail selling prices of diesel, kerosene and cooking gas to insulate domestic users from the impact of rise in international oil prices and to contain domestic inflationary conditions.
For other sensitive products the under-recoveries for kerosene stands at Rs.36.83 per litre and Rs.470 per cylinder for liquefied petroleum gas (LPG).
According to the current estimates, for 2013-14, the three OMCs are slated to incur under-recovery of Rs 1,44,000 crore crore on sale of three sensitive products.
The OMCs had incurred under-recovery of Rs.1,61,029 crore during 2012-13 and Rs.25,579 crore during April-June 2013.
The three OMCs have reported a combined loss of Rs.4,403 crore in the first (April-June) quarter of the current fiscal.