State-run oil marketing companies (OMCs) are incurring steep per-litre losses of around ₹24 on petrol and nearly ₹60 on diesel, as fuel marketing margins have sharply turned negative amid rising global crude prices and elevated tax burdens, according to Kotak Institutional Equities.
The brokerage said “OMCs are likely making losses at current global prices,” with the latest estimates showing a sharp deterioration in downstream fuel economics.
The margin erosion has persisted despite a ₹10 per litre excise duty cut, with the report noting that “with steep rise in international prices, marketing margins have… turned negative.”
Refining Spread Compression
A key driver of the pressure is the sharp increase in windfall taxes on petroleum exports, particularly diesel. Kotak highlighted that “diesel export tax is up 158% to ₹55.5/liter or US$95/bbl,” significantly compressing refining spreads.
ALSO READIndian negotiators to seek better terms in US trade talks
The report added that the revised tax structure “leaves very low or negative spreads versus Dubai or the Indian crude basket,” underscoring the extent of profitability erosion for refiners.
The impact is most visible in diesel, where post-tax margins have shrunk sharply. Data in the report shows that spreads have dropped to as low as $3 per barrel over Dubai crude and turned negative against other benchmarks, limiting earnings visibility for refiners.
While petrol remains exempt from windfall taxes, pricing pressures persist due to elevated global crude benchmarks and unchanged retail fuel prices, which continue to weigh on marketing margins.
The data also marks a sharp reversal from earlier trends. Petrol margins had remained positive through most of FY25 and early FY26, reaching ₹11–11.5 per litre, while diesel margins had recovered to ₹8–9 per litre, before the recent correction pushed both fuels into loss-making territory.
Kotak further noted that high export duties and limited storage capacity could alter domestic market dynamics. It said “non-SEZ independent refiners will have to sell the products in the domestic market at a discount,” potentially allowing OMCs to secure better pricing in the domestic market.
However, the broader outlook remains constrained by global factors. The brokerage expects crude oil prices to remain elevated amid ongoing geopolitical tensions and uncertainty around key supply routes, which could prolong the pressure on fuel margins.
ALSO READUnemployment rises to 5.1% in March, driven by urban joblessness
Earlier, a report by Macquarie Group had estimated that Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) were incurring combined daily losses of about ₹1,600 crore due to frozen retail fuel prices.
The brokerage had said under-recoveries stood at around ₹18 per litre on petrol and ₹35 per litre on diesel, reflecting the impact of rising global crude prices.
TOPICSCrude oilfuelPetrol PriceThis article was first uploaded on April fifteen, twenty twenty-six, at seven minutes past seven in the evening.