Oil PSUs face Rs 30,000 cr monthly losses amid hike talk

What the government has said so far

State-run oil marketing companies are losing around Rs 30,000 crore a month by selling petrol, diesel and domestic LPG below market prices, according to the petroleum ministry. The comment came from Sujata Sharma, joint secretary in the petroleum ministry, during a press briefing in New Delhi. When asked if a fuel price hike is being considered, Sharma did not respond directly. She said the endeavour so far has been to ensure there is no price increase for consumers. Officials also said the current loss level is not sustainable indefinitely. They pointed to the likelihood that global prices could stay elevated for at least four months, even if a permanent ceasefire were announced now. Social media discussion has focused on what happens next if the monthly losses continue to build. The central question is whether retail prices remain frozen, or are adjusted to reduce under-recoveries.

Why under-recoveries are back in focus

Under-recoveries refer to the gap between input costs and the retail prices realised by oil marketing companies. Sources cited in the reports said these under-recoveries rose sharply in March and April before tapering somewhat. For April, daily under-recoveries were estimated at about Rs 18 per litre on petrol and Rs 25 per litre on diesel. That translated into average losses of roughly Rs 700-1,000 crore a day for the three oil marketing companies combined, as per sources with direct knowledge. Another estimate in the same set of reports put the daily loss range at Rs 600-700 crore, reflecting the uncertainty in day-by-day calculations. Either way, the broad message is that the gap is large enough to pressure balance sheets quickly. Officials said the government and the companies have absorbed higher costs for more than two months. The recognition being discussed publicly is that this arrangement cannot run indefinitely.

Crude price spike and a weaker rupee

The primary driver cited is the sharp rise in crude prices since the escalation in West Asia. Officials said crude for Indian refiners rose from an average of $19 per barrel in February to $114.4 last month. Another line in the reports said crude surged from around $10 to $126 per barrel amid the conflict, capturing the peak stress described by sources. The cost in rupees rose further because the currency weakened against the dollar, raising the effective landed cost. Officials also said Brent crude hovered near $100 a barrel on a recent Friday, while the Indian oil basket was priced at $19.69 a barrel. Even with some cooling from the peaks, the level remains far above February averages. At the retail level, reports cited petrol at Rs 94.77 per litre and diesel at Rs 87.67, with prices largely unchanged since early April 2022. The mismatch between volatile global inputs and stable pump prices is what is now dominating investor and consumer discussions.

Excise duty cuts and limited headroom

Officials said the government cut excise duty on petrol and diesel to cushion consumers from the global spike. Sharma said the excise duty reduction costs the government about Rs 14,000 crore a month in foregone revenue. In one portion of the reports, the excise duty cut was described as Rs 13 per litre on petrol and Rs 10 per litre on diesel. Another portion specified that the special additional excise duty on petrol was cut to Rs 3 per litre from Rs 13, and the excise duty on diesel was reduced to zero from Rs 10 per litre. These details point to meaningful tax-side absorption, but also underline that the government has limited room to keep reducing duties. Sources said under-recoveries would have swollen to nearly Rs 62,500 crore without the Rs 10-per-litre intervention cited. That framing is central to the current policy debate because it shows the size of the problem even after tax relief. Officials also flagged that the government will have to bear the subsidy on domestic cooking gas cylinders, adding to fiscal complexity.

Marketing margins and LPG under-recoveries

Beyond daily under-recoveries, the discussion has widened to negative marketing margins at prevailing crude levels. Rating agency ICRA, as cited, said state-run OMCs are currently making negative marketing margins of around Rs 14 per litre on petrol and Rs 18 per litre on diesel. That suggests that even if refining economics vary, marketing losses are visible at the pump under the current price structure. The same set of reports cited ICRA estimating LPG under-recoveries at around Rs 80,000 crore for FY27 if current trends persist. The reports also said commercial LPG prices have already been raised by around Rs 993 per cylinder. This contrast between commercial and domestic pricing is part of why LPG under-recoveries remain sensitive. Officials and sources repeatedly linked the policy choice to shielding households from sudden increases. The result is continued pressure on OMC balance sheets if the gap remains unresolved. Investors tracking IOC, BPCL and HPCL are therefore focusing on when and how the gap is narrowed.

What a fuel price hike could look like

Fuel price hike speculation has sharpened because several reports said an increase could come before May 15. Sources told India Today TV that petrol and diesel prices could rise by around Rs 4-5 per litre if a hike is approved. The same sources said domestic LPG cylinder prices may see an increase of around Rs 40-50. If it happens, it would be the first major revision in petrol and diesel prices in nearly four years, with retail rates described as largely frozen since 2022. Officials said India has not raised pump prices while countries such as Japan, Spain and France reportedly increased prices by 30-35% since the conflict began. The policy choice is being framed as a trade-off between protecting consumers and protecting OMC finances. Another layer is the question of how much of any hike is passed through immediately versus phased in. Officials said the government is monitoring developments in West Asia and evaluating timing and extent, signalling that multiple options are on the table.

Inflation risks are part of the decision

Officials explicitly linked petrol price increases to the risk of higher headline inflation. Retail inflation was cited at 3.4% in the reports, and a steep rise in petrol prices was described as a concern. The transmission is not only direct through fuel bills, but also indirect via freight, logistics and broader cost pressures. That is why officials have highlighted that the endeavour has been to avoid a price increase so far. At the same time, the statement that losses are not sustainable indefinitely signals the constraints around continued absorption. The reports also described projections that prices may stay elevated for at least four months, which complicates a wait-and-watch approach. With the government already taking a revenue hit from excise cuts, the room for additional fiscal cushioning appears limited. Social media chatter has focused on whether any move will be calibrated to avoid a sharp inflation spike. The official messaging suggests the government wants to balance OMC stress and inflation sensitivity rather than prioritise only one.

What markets may track for IOC, BPCL and HPCL

The companies at the centre of the discussion are Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL). Sources said the three together are absorbing about Rs 30,000 crore of under-recoveries per month under current conditions. Reports also emphasised that supplies have remained uninterrupted across the country, with no rationing, mobility restrictions or supply disruptions. That matters because it shows operational continuity even under stress, but it does not remove the financial impact of selling below cost. Investors are likely to watch for any formal decision on retail pricing, especially if reports of a pre-May 15 hike gain confirmation. Another variable is whether further tax adjustments are used again, given officials have already described limited headroom. Commentary in the reports also pointed to strain on OMC balance sheets and marketing margins, which could influence future borrowing and spending decisions. For markets, the near-term trigger remains policy, because the core gap is created by controlled retail prices against a global input curve. Until that gap narrows, the pressure narrative around oil PSU marketing profitability is likely to stay active.