In India, the price of petroleum products has been deregulated mainly to :

In India, the deregulation of petroleum product prices, specifically petrol in 2010 and diesel in 2014, was primarily driven by the need to reduce the fiscal burden of subsidies [1]. Before deregulation, the government heavily subsidized these fuels to protect consumers from global price volatility, leading to significant 'under-recoveries' for public sector Oil Marketing Companies (OMCs). These subsidies contributed to a deteriorating fiscal balance and increased the national fiscal deficit. By moving to a market-determined pricing mechanism, the government aimed to eliminate these direct and indirect subsidies, allowing OMCs to recover costs based on international crude oil rates and exchange movements. This shift also encourages efficiency and reduces market distortions, such as fuel diversion and the lack of capital for oil companies to reinvest in infrastructure or exploration.

Sources

1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 9: Subsidies > 9.3 Fuel Subsidies > p. 287