Losses on petrol have widened to Rs 18 per litre and to Rs 35 on diesel as state-owned fuel retailers continue to keep pump prices frozen despite a sharp rise in input costs, sources said.
Despite prices being deregulated more than a decade back, state-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have not changed the retail petrol and diesel price since April 2022. Global crude oil prices have seen sharp fluctuations over this period – from above USD 100 per barrel following the Russia-Ukraine war, to easing to around USD 70 a barrel earlier this year, before surging again to about USD 120 last month after the US-Israel attacks on Iran triggered fresh supply concerns.
The three firms were incurring losses of about Rs 2,400 crore per day at the peak last month, which have since narrowed to around Rs 1,600 crore daily after the government cut excise duty on petrol and diesel by Rs 10 per litre each – a reduction that was not passed on to consumers but used to partly offset losses, industry sources said.
The losses in March have wiped away all gains they made in January/February, they said, adding the three firms are most likely to post losses in the January-March quarter.
Macquarie Group, in a report on ‘India Fuel Retail’, said, “At spot petrol-diesel pricing of USD 135-165 per barrel, we estimate India’s oil marketing companies lose Rs 18 and Rs 35 per litre on petrol and diesel sales (respectively).”
Every USD 10 per barrel increase in crude adds roughly Rs 6 per litre to marketing losses, the report said.
The brokerage flagged a high likelihood of retail fuel price hikes after elections in key states like West Bengal and Tamil Nadu at the end of this month. “We see risk of higher pump prices post state elections in April.”
India, which imported about 88 per cent of its crude oil requirement in 2025, remains highly exposed to global price swings. Around 45 per cent of imports came from the Middle East, 35 per cent from Russia and 6 per cent from the United States. Despite this, the country continued to be a net exporter of key petroleum products, including diesel, petrol and aviation turbine fuel.
While the government cut excise duty on fuels by Rs 10 per litre in March, central levies have been on a declining trend and now stand at Rs 11.9 per litre on petrol and Rs 7.8 per litre on diesel.
Even a complete removal of excise duties would not fully offset OMC losses at current prices, the report noted.
State-level VAT rates, however, have largely remained stable.
The fiscal implications of further tax cuts could be significant. Based on provisional consumption estimates of about 170 billion litres in FY26, a full rollback of excise duties could lead to an annual revenue loss of around USD 36 billion, widening the fiscal deficit by an estimated 80 basis points, it said.
The contribution of fuel excise duties to government revenue has already declined to about 8 per cent in FY26 from 22 per cent in FY17, and now accounts for less than a fifth of the fiscal deficit, down from a peak of 45 per cent.
Higher crude prices also pose a risk to India’s external balances. The current account deficit, which was near balance in mid-2025, is expected to widen to around USD 20 billion in the first quarter of 2026. A sustained USD 10 per barrel rise in crude could expand the deficit by roughly 30 basis points of GDP, assuming no policy response, the Macquarie report said.
Earnings visibility for OMCs remains uncertain, with every USD 1 per barrel change in crude prices impacting EBITDA by about 5 per cent. The sector’s break-even crude price is estimated at USD 80-85 per barrel.
Given the outlook, Macquarie Group said it prefers utilities over oil marketing companies in the near term. (News Agencies)