India’s state-run oil marketing companies (OMCs) are incurring under-recoveries of around Rs 30,000 crore every month — or nearly 1,000 crore a day — as petrol, diesel and LPG prices remain frozen despite crude oil surging to around $120 per barrel amid the West Asia conflict and disruption in the strait of hormuz.
The mounting losses are piling pressure on the balance sheets of Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), even as the government continues to shield consumers from the global energy shock.
ALSO READIndia may go slow on the trade pact with US
“Our oil marketing companies are buying expensive raw oil, gas and LPG from the market. But to protect our consumers, they are selling at low prices,” Sujata Sharma, joint secretary, ministry of petroleum and natural gas, said on Friday.
Cost of Protection
The government has already cut excise duty by Rs 10 per litre on petrol and diesel to soften the impact of rising international prices, a move that is costing the exchequer around Rs 14,000 crore every month in lost revenue.
“The cost of this reduction is Rs 14,000 crores per month,” Sharma said, adding that had the Centre not intervened, the burden would have entirely fallen on the OMCs.
Hormuz Disruption
Industry estimates suggest under-recoveries during April stood at around Rs 18 per litre on petrol and Rs 25 per litre on diesel, as international crude and fuel prices spiked after shipping movement through the Strait of Hormuz was severely disrupted.
The strategic waterway normally handles nearly one-fifth of global oil and gas trade, and the ongoing conflict has sharply raised freight costs, marine insurance premiums and emergency crude sourcing expenses for refiners.
India imports nearly 88% of its crude oil requirement and remains heavily exposed to global energy price volatility. The Indian crude basket, which averaged around $70 per barrel last year, crossed $113-120 per barrel in April, according to official estimates.
Despite the global spike, petrol and diesel prices in India have remained unchanged for over four years. Petrol currently costs Rs 94.77 per litre in Delhi, while diesel is priced at Rs 87.67 per litre. Domestic LPG is retailing at Rs 913 per 14.2-kg cylinder in the national capital.
ALSO READNew economic blueprint targets worldwide employment shortfall
Rating agency Icra estimates that state-run OMCs are currently making negative marketing margins of around Rs 14 per litre on petrol and Rs 18 per litre on diesel. LPG under-recoveries are projected at around Rs 80,000 crore in FY27 if current trends persist.
Earlier, the government has ruled out any immediate compensation package for losses incurred on petrol, diesel and jet fuel sales, increasing pressure on OMC finances and future capital expenditure plans.
The ministry said fuel supplies across the country remain uninterrupted despite the global crisis.
“There is no rationing, no shortage of petrol and diesel,” Sharma said, adding that refineries were operating at optimum capacity.
India has also prioritised household cooking gas supply amid the disruption. The government said 97 lakh LPG cylinders were supplied over the last two days, while fertiliser plants continue to receive 98% of their average fuel allocation of the previous six months.
At the same time, 13 Indian-flagged vessels remain stranded west of the Strait of Hormuz, including crude carriers, LPG tankers, container ships and bulk cargo vessels, according to official shipping ministry data.
TOPICScrude oil pricesThis article was first uploaded on May eight, twenty twenty-six, at thirty minutes past eleven in the night.