OMC losses: ₹1,700 cr/day under-recoveries, May 2026

What changed in India’s fuel market

State-owned oil marketing companies (OMCs) are absorbing a sharply rising gap between global input costs and retail selling prices to keep petrol, diesel and LPG available at prices that are below cost. The loss, described as under-recovery, is now estimated at ₹1,600 crore to ₹1,700 crore a day. Over 10 weeks since the war broke out in West Asia, the combined under-recovery is said to be well over ₹100,000 crore. The scale of this burden is raising questions about how long OMCs can continue to shield consumers without significant financial stress.

The companies at the centre of the under-recoveries

The under-recoveries are being borne by the three state-owned OMCs: Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). Two sources with direct knowledge of the matter said the losses across petrol, diesel and LPG are at record highs. Under-recovery refers to the difference between the cost of fuel and the retail selling price. In practical terms, it means the companies are selling key fuels at prices that do not fully cover the prevailing cost of supply.

Why the losses have risen over the past 10 weeks

The losses have widened since the conflict began in the Middle East about 10 weeks ago, triggering a global energy shock. While several global energy systems either imposed rationing or passed on steep price increases, India’s state-run retailers continued supplies without interruption. That approach has meant holding retail prices below cost even as international conditions tightened. The result is a fast-growing working-capital requirement for the OMCs as they continue to fund daily operations.

Retail prices held at older levels despite a cost shock

Despite a 50% surge in input crude oil prices, petrol and diesel prices have remained at what the report describes as a two-year-old rate. Petrol continues at ₹94.77 a litre and diesel at ₹87.67 a litre. Maintaining these rates limits immediate inflationary pressure for consumers, but it shifts the cost to the balance sheets of the fuel retailers. The same pressure is visible in domestic cooking gas.

LPG pricing and the partial increase in March

Domestic LPG prices were raised in March by ₹60 per cylinder, but the report says they are still well below actual cost. LPG is a politically and economically sensitive household fuel, and under-recoveries in LPG can add materially to daily losses when international prices rise. The continued mismatch between input costs and retail prices adds to the combined under-recovery estimate provided by the sources.

What under-recoveries mean for operations and borrowing

The report notes that the revenue OMCs earn from selling fuel is the main source used to buy crude oil, build infrastructure to process it into fuels, and operate the distribution network that supplies consumers. With under-recoveries at ₹1,600 crore to ₹1,700 crore daily, cash generation becomes strained. Sources said the OMCs may have to borrow more to meet working capital needs, particularly for crude purchases. The longer the price-cost gap persists, the larger the funding requirement becomes.

Government actions on excise duty and the fiscal impact

Alongside the OMC burden, the government has also taken a revenue hit by cutting excise duty, sources said. The special additional excise duty on petrol was cut to ₹3 per litre from ₹13 per litre. Excise duty on diesel was reduced to zero from ₹10 per litre. The revenue impact of these cuts is estimated at ₹14,000 crore a month, according to the sources cited.

Key figures at a glance

Market impact and why this matters for investors

The reported figures underline the immediate stress on the marketing margins of IOC, BPCL and HPCL, because the daily under-recovery is tied to day-to-day fuel sales volumes and current replacement costs. Holding pump prices steady while input costs rise transfers volatility from consumers to corporate cash flows. The risk flagged in the report is not disruption of supply, but the cumulative financial impact if the gap persists. The mention of potential additional borrowing highlights a liquidity angle: rising working capital needs can increase financing costs and constrain flexibility in operations and capital expenditure.

Analysis: the policy trade-off behind stable pump prices

The report frames the situation as a deliberate insulation of consumers from a global energy shock. That insulation has two visible costs in the data: large under-recoveries for the OMCs and a monthly excise-duty hit for the government. With petrol and diesel held at ₹94.77 per litre and ₹87.67 per litre despite a 50% surge in crude input prices, the pressure concentrates in a narrow part of the value chain. Sources cited in the report indicate the widening losses are prompting questions on sustainability and suggest that a fuel price hike is seen as inevitable, with the government expected to decide the timing.

Conclusion

State-run fuel retailers have maintained uninterrupted supplies of petrol, diesel and LPG at below-cost prices during the 10 weeks following the West Asia conflict, but the reported under-recoveries of ₹1,600 crore to ₹1,700 crore a day have taken the total to well over ₹100,000 crore. At the same time, excise cuts have an estimated fiscal impact of ₹14,000 crore a month. The next trigger point, as indicated by sources in the report, is whether and when the government chooses to allow price increases or other measures to reduce the gap between costs and retail prices.