OMC losses near ₹30,000 crore a month: May 2026

What is driving the latest stress on oil PSUs

India’s state-run oil marketing companies are reporting under-recoveries of nearly ₹30,000 crore a month as they keep retail fuel prices largely unchanged despite a sharp rise in global crude. Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) are selling petrol, diesel and domestic LPG below international benchmark-linked costs, according to the reports cited. The squeeze has intensified during the continuing West Asia crisis, which has kept crude prices elevated and increased volatility in refined product markets.

The policy choice has insulated households from global fuel inflation. Several countries have seen petrol and diesel prices rise by 20% to 50% since the crisis began, while India has broadly held pump prices steady. But the approach shifts the immediate burden to OMC balance sheets and, through tax cuts, to the exchequer.

Retail prices remain steady while costs rise

In Delhi, petrol has been cited at around ₹94 per litre to ₹94.77 per litre, and diesel at around ₹87 per litre to ₹87.67 per litre, with domestic LPG cylinders at about ₹993. Reports also state that petrol and diesel retail prices have not moved since April 2022. The gap between these retail prices and import-parity or benchmark-linked costs is being absorbed as under-recoveries.

One government assessment in March estimated under-recoveries at nearly ₹26 per litre on petrol and ₹81.90 per litre on diesel, with combined daily losses of roughly ₹2,400 crore. Other estimates in the same set of reports put daily losses at about ₹700-1,000 crore, or ₹1,600-1,700 crore, reflecting different windows and assumptions.

How big are the under-recoveries and where they show up

Under-recoveries are essentially the difference between the cost of fuel (linked to crude and product prices) and the realised retail selling price. In the current episode, the under-recoveries span petrol, diesel and domestic LPG. A separate datapoint in the material says the last 10 weeks have piled up more than ₹1 trillion (₹100,000 crore) of under-recovery.

Rating agency Icra has flagged that if crude remains around $120-125 per barrel, OMCs could face negative marketing margins of ₹14 per litre on petrol and ₹18 per litre on diesel. Icra also estimates LPG under-recoveries may reach ₹80,000 crore in FY27 under that scenario. Prashant Vasisht, senior vice-president and co-group head at Icra, said the current scale of losses is financially untenable if prolonged.

Crude price trajectory and the policy trade-off

One set of officials’ estimates cited says crude costs jumped from around $19 per barrel in February to over $126 per barrel amid the conflict. Other parts of the material refer to Brent crude crossing $108 per barrel and remaining above $100 per barrel in what is described as an “adverse scenario” threshold by Fitch.

The central tension is straightforward. Keeping pump prices stable supports inflation management, but it can weaken the financial position of the country’s key fuel suppliers and raise questions about how long they can fund working capital needs without additional borrowing.

Government actions and official messaging

The material notes excise duty cuts of ₹13 per litre on petrol and ₹10 per litre on diesel. Another report specifies the special additional excise duty on petrol was cut to ₹3 per litre from ₹13, and excise duty on diesel reduced to zero from ₹10. Sources cited also say the government has taken a revenue hit of about ₹14,000 crore per month due to excise reductions.

At an inter-ministerial briefing in New Delhi, Joint Secretary in the Ministry of Petroleum and Natural Gas Sujata Sharma was cited as saying there are “no immediate plans” to hike fuel prices, while also acknowledging the endeavour to keep prices stable has hit OMC finances and that under-recoveries are of the order of ₹30,000 crore per month. The reports also say supplies have remained uninterrupted with no rationing.

What analysts and economists are signalling

Sourav Mitra, partner - oil and gas at Grant Thornton Bharat, said price freezes may help contain inflation in the near term but are “not sustainable beyond the near term.” He said a calibrated combination of retail price rationalisation, targeted government support (particularly for residential LPG), and burden-sharing mechanisms may be required if elevated crude prices persist.

Madan Sabnavis, chief economist at Bank of Baroda, was cited as saying retail fuel price hikes could happen at any stage depending on broader macroeconomic developments, and that inflation remains a critical constraint.

Timing: why mid-May is being watched

Multiple reports cited suggest a revision in fuel prices may come before mid-May, with some sources pointing to a window “before May 15, 2026.” However, the Centre’s public stance in the same material remains that its current endeavour is to avoid hikes for consumers, and “no official figure has been confirmed” on a prospective hike as of May 9, 2026.

Key figures at a glance

Market impact: what matters for investors

For investors tracking IOC, BPCL and HPCL, the main variables in the reports are crude persistence, the pace of pass-through, and the quantum of fiscal support. Under-recoveries of the magnitude cited can compress marketing margins and pressure cash flows, particularly if sustained for weeks. The material explicitly notes more than 70 days of continuous under-recovery and the possibility of higher borrowing to fund working capital.

The broader market takeaway is that fuel price stability can reduce near-term inflation pressure, but it can also transfer stress to corporate balance sheets and fiscal resources. The reports frame this as a macroeconomic balancing act that becomes harder the longer crude stays above $100-110 per barrel.

Conclusion

OMCs are absorbing sizeable under-recoveries as retail petrol, diesel and domestic LPG remain largely unchanged despite elevated crude prices linked to the West Asia crisis. Analysts quoted describe the current loss levels as unsustainable if prolonged, and multiple reports point to a possible revision window before mid-May even as officials say there are “no immediate plans” to hike prices. The next steps, as described in the material, hinge on how long crude remains elevated, how inflation evolves, and what combination of price rationalisation and targeted support the government chooses.