India's Oil Marketing Companies Face Massive Losses Amid Global Energy Crisis

Significant Financial Strain on Oil Companies

New Delhi, May 10: In the last ten weeks, India's state-owned oil marketing companies (OMCs) have absorbed losses exceeding ₹1 lakh crore while protecting consumers from the severe global energy crisis caused by the ongoing conflict in West Asia.

The three major public sector fuel retailers—Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited—are currently facing daily under-recoveries of approximately ₹1,600 crore to ₹1,700 crore due to selling petrol, diesel, and LPG below their actual costs, as reported by sources.

Despite a nearly 50% increase in global crude oil prices since the onset of the Middle East conflict, retail fuel prices in India have remained stable at levels not seen in nearly two years.

Currently, petrol is priced at ₹94.77 per litre and diesel at ₹87.67 per litre. Although domestic LPG cylinder prices were raised by ₹60 in March, they still fall significantly short of the actual procurement costs.

Sources indicate that OMCs have successfully maintained a steady supply of fuel and avoided panic in the domestic market, even as several countries have implemented fuel rationing or passed on substantial price hikes to consumers.

However, the escalating financial burden raises concerns about the sustainability of the existing pricing structure.

“The total under-recovery on petrol, diesel, and LPG has already surpassed ₹1 lakh crore in the past ten weeks. If high crude prices continue, OMCs may need to increase their working capital borrowings and adjust some capital expenditure timelines,” a source mentioned.

The companies depend entirely on fuel sales to fund crude oil imports, refinery operations, infrastructure development, and fuel distribution networks.

Prolonged losses could hinder future investments in refining capacity, pipelines, strategic reserves, and clean energy transition initiatives, according to sources.

“Financially robust OMCs are essential for India's energy security, supply continuity, infrastructure growth, and economic stability. Ongoing pressure on their financial health may impact investments in refining, pipelines, biofuels, and transition fuels,” another source added.

Furthermore, any potential increase in petrol and diesel prices will now necessitate a political decision from the government.

“It is clear that a fuel price hike is unavoidable, but the timing and extent of the increase will need to be determined by the government,” a source stated.

India has managed to keep fuel prices stable despite significant disruptions in energy imports due to the West Asia conflict, which has affected nearly 40% of crude oil imports, 90% of LPG imports, and around 65% of natural gas supplies used for power generation, fertilizers, CNG, and piped cooking gas.

To mitigate the impact on consumers from the global energy crisis, the government also reduced excise duties on fuel.

The special additional excise duty on petrol was lowered from ₹13 per litre to ₹3 per litre, while the excise duty on diesel was eliminated entirely.

According to sources, the government is facing a monthly revenue loss of nearly ₹14,000 crore due to these excise duty cuts.