Fuel prices steady as govt denies OMC compensation plan

What the government said on OMC support

The Ministry of Petroleum and Natural Gas has said it is not considering any financial support for state-run oil marketing companies (OMCs) even as they incur losses on retail fuel sales. Sujata Sharma, Joint Secretary at the ministry, said on May 4 that there is no proposal before the government to support OMCs for their losses. The comment came amid rising global crude prices and increased scrutiny of how long the retail price freeze can be sustained. The ministry also pushed back on speculation of a post-election hike, with officials saying there is no such proposal under consideration. Reports suggesting imminent increases were described by the ministry as “mischievous and misleading,” according to the information cited. The stance keeps the immediate focus on consumer price stability, but leaves OMCs to absorb under-recoveries.

Retail petrol and diesel prices remain unchanged

Officials said retail prices of petrol and diesel have not been raised, despite international volatility linked to the war in West Asia. Retail petrol and diesel prices in India have largely remained unchanged since early April 2022, according to the details provided. Sharma reiterated there has been no hike in petrol and diesel since April 6, 2022. Another account in the provided information notes prices of regular petrol and diesel have largely remained unchanged since March 2024, indicating a prolonged period of limited revisions in either case. In Delhi, petrol was cited at ₹94.77 per litre and diesel at ₹87.67 per litre. The government’s position is that consumer interest has been prioritised while deciding on revisions.

Under-recoveries and the reported daily hit to OMCs

With pump prices steady and procurement costs rising, OMCs are facing significant under-recoveries on petrol and diesel. Sharma said under-recoveries vary day to day and may be around ₹20 per litre on petrol and around ₹100 per litre on diesel. A separate set of figures cited under-recoveries of about ₹24.40 per litre on petrol and ₹104.99 per litre on diesel as of April 1, 2026. The combined daily burden for OMCs was reported at roughly ₹2,400 crore as of March 27, 2026. Another section of the provided material said losses were about ₹2,400 crore per day at the peak last month and later narrowed to around ₹1,600 crore daily after an excise duty cut. These numbers highlight the strain on OMC balance sheets when retail prices do not reflect higher global costs.

Crude oil surge and supply risks from West Asia

The policy stance comes at a time of higher crude prices and supply concerns. Officials pointed to volatility in international crude oil markets during the West Asia conflict. The Indian crude basket was cited as rising from an average of $10 per barrel last year to an average of more than $113 per barrel in April 2026. Another update said crude surged past $126 a barrel on Thursday, with the spike linked to geopolitical signals of potential disruption around the Strait of Hormuz. In global markets, average diesel and petrol prices in April were reported as 119% and 69% higher than in February, respectively. The combination of higher crude and refined product prices increases the gap between retail selling prices and costs for state-run retailers.

What prices have moved: commercial LPG and bulk fuels

While retail petrol and diesel have stayed steady, some categories have seen increases. Sharma said only bulk or industrial diesel and commercial LPG used by hotels and restaurants have been raised. OMCs also increased the price of domestic LPG by ₹60 per 14.2-kg cylinder on March 7, in the context of supply disruptions around the Strait of Hormuz. Another update said the government has kept domestic cooking gas unchanged to protect households, while OMCs were facing under-recoveries on LPG. The figures cited include an under-recovery of about ₹380 per domestic LPG cylinder, with cumulative losses projected to reach around ₹40,484 crore by end-May if prices remain unchanged. The government also said that in the previous year, LPG-related losses of about ₹60,000 crore were split equally between oil PSUs and the Centre.

Measures cited: excise cuts and export duties

The government cited tax measures to limit the pass-through of higher crude to consumers. Sharma said excise duty was reduced by ₹10 per litre on auto fuels to keep domestic prices stable. Another section states that on March 27, 2026, excise duty on petrol and diesel was reduced by ₹10 per litre to partly offset losses rather than being passed on to consumers. Central levies were cited at ₹11.9 per litre on petrol and ₹7.8 per litre on diesel in one report. The material also referenced export-related taxes, including an export duty of ₹23 per litre on diesel and ₹33 per litre on aviation turbine fuel (ATF), with petrol levy staying nil, and a windfall tax framework aimed at encouraging domestic supply prioritisation.

Historical context: oil bonds and subsidy mechanics

The current stress revives older debates about how under-recoveries are financed. The material notes that domestic price insulation has historically resulted in under-recoveries for OMCs during high global prices. To offset losses, the government issued oil bonds to OMCs in lieu of cash subsidies starting in 2002. As of February 2023, the outstanding value of oil bonds was cited at ₹92,200 crore, or ₹1,06,933 crore including interest. All the bonds were stated to mature by April 2026. This background matters because it frames why compensation expectations arise when price freezes persist.

Key data points at a glance

What to watch next

Government sources cited by Moneycontrol said state-run fuel retailers may raise petrol and diesel prices in the coming days to offset mounting losses, though the ministry has said there is no proposal under consideration. The policy tension is clear: raising retail prices could ease OMC under-recoveries, but could also affect inflation and household budgets. The ministry’s public position remains focused on keeping retail prices stable and using tax interventions to absorb volatility. Investors will watch for any formal communication on retail pricing, further tax changes, or additional measures around domestic supply priorities. Any change in retail prices would also influence the near-term reported marketing margins for OMCs.

Conclusion

The petroleum ministry has reiterated that it has no plan to compensate state-run OMCs, even as under-recoveries rise with higher crude prices and supply risks linked to West Asia. For now, retail petrol and diesel prices remain unchanged, while selected bulk fuels and commercial categories have seen adjustments. The next signals are likely to come through official decisions on retail price revisions, export-related levies, and any further tax actions as global crude volatility continues.