OMCs face ₹30,000 crore monthly hit in 2026

Price freeze meets a global energy shock

India’s state-run oil marketing companies are absorbing large losses to keep retail prices of petrol, diesel and LPG unchanged despite a sharp rise in global crude prices. The losses are being reported as “under-recoveries”, which reflect the gap between input costs and realised retail prices. Officials and sources cited by PTI said the under-recoveries have reached around ₹30,000 crore a month for Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). The situation has intensified amid turmoil in West Asia, which has disrupted shipping routes and raised freight and insurance costs. The government has said its focus has been to avoid price increases for consumers so far. At the same time, the sustained pressure is raising questions on oil companies’ balance sheets and borrowing needs.

What officials said at the inter-ministerial briefing

At an inter-ministerial media briefing in New Delhi, Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas, said the government’s effort has been to ensure there is “no price increase for consumers.” She said this approach has hit the finances of oil marketing companies. Sharma put monthly under-recoveries at “the order of ₹30,000 crore,” covering petrol, diesel and LPG. She did not commit to whether retail fuel prices will remain unchanged in the coming period. The briefing also covered maritime and supply conditions linked to the West Asia crisis. Officials said India has seen uninterrupted fuel supply and no rationing despite global disruptions.

How big are the under-recoveries on petrol and diesel

Sources said under-recoveries rose sharply in March and April before tapering somewhat. During April, daily under-recoveries were estimated at about ₹18 per litre on petrol and ₹25 per litre on diesel. This translated into average losses of roughly ₹700-1,000 crore per day for the oil marketing companies, according to the people cited. Another set of estimates in the reports put losses at about ₹600-700 crore a day, highlighting that the magnitude varies with daily crude and product prices. Either way, the figures point to heavy cash flow stress as long as retail prices remain unchanged. The under-recoveries are linked to high import costs for crude and other fuels compared with retail pump prices.

What changed in global crude prices

The reports said crude climbed from about $10 per barrel two months earlier to nearly $120 per barrel amid supply disruptions and higher shipping risks around the Strait of Hormuz. Another account said Brent was near $12 per barrel before the February 28 strikes by the United States and Israel on Iran escalated tensions across West Asia. As the conflict widened, shipping risks intensified and tanker movement was disrupted. At the peak, Brent briefly rose to levels near $144 per barrel, the reports said. These moves fed through to higher input costs for Indian refiners and fuel retailers even though retail prices were held steady.

Excise duty cuts and what they changed

The government cut excise duties to cushion the impact on oil marketing companies and consumers. 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. Sharma said the cost of these reductions to the government is about ₹14,000 crore per month. Officials also said that without the excise duty cuts of ₹10 per litre each on petrol and diesel, under-recoveries would have risen to nearly ₹62,500 crore.

Retail prices in India stayed unchanged

Even as global prices rose, retail fuel prices in India were reported to have remained unchanged since February 28. Petrol was cited at ₹94.77 per litre and diesel at ₹87.67 per litre. Officials and sources said there was no rationing, mobility restriction, or supply disruption during the period covered in the reports. They also highlighted that India avoided the steep retail hikes seen in several overseas markets. The government said prices in India were around ₹94.77 per litre compared with nearly ₹200 per litre in countries such as Germany, France and the United Kingdom.

Supply chain stress and the Strait of Hormuz risk

The crisis has been linked to risks around the Strait of Hormuz, a key route for global energy flows. Officials said nearly 20% of the world’s energy passes through the region. One report said the war disrupted India’s imports of 40% of crude oil, 90% of cooking gas LPG, and 65% of natural gas, but state-owned oil companies maintained uninterrupted supplies for about 10 weeks. Sources also pointed to additional costs from emergency crude sourcing, higher freight from vessel diversions, elevated marine insurance premiums and refinery optimisation expenses. The Ministry of Ports, Shipping and Waterways said all Indian seafarers in the Gulf region were safe, with no incident involving Indian-flagged vessels or foreign ships carrying Indian crew reported in the prior 48 hours.

What this means for OMC balance sheets and capex

Sources said prolonged under-recoveries can affect balance sheets and raise working capital borrowing requirements. They also noted that investments linked to refining expansion, energy security, ethanol blending and transition fuels would continue with government backing. The policy choice, as described by officials and sources, has been to prioritise consumer price stability and economic continuity during the shock. But the scale of losses makes the funding burden more visible, especially when input costs remain elevated for a sustained period. The reports did not quantify capex changes, but they flagged that a prolonged high-crude environment could force recalibration of capital expenditure plans.

Key numbers at a glance

Why the story matters for investors and policy

For markets, the key issue is the duration of the gap between global input costs and domestic retail prices. Under-recoveries of the magnitude cited can pressure cash flows and increase short-term borrowings, especially if pump prices remain unchanged. The government’s excise duty cuts show a direct fiscal cost alongside the losses absorbed by OMCs. At the same time, the reports suggest the policy has helped avoid supply disruptions and rationing during a period of heightened shipping risk. Sharma’s refusal to comment on whether retail prices will remain frozen indicates the decision remains open-ended and sensitive to global price movements.

Conclusion

India’s state-run fuel retailers are reported to be absorbing around ₹30,000 crore a month in under-recoveries while keeping petrol, diesel and LPG prices stable amid a West Asia-driven energy shock. The government has partly cushioned the blow through excise duty cuts that cost about ₹14,000 crore per month. With crude prices rising sharply and shipping risks elevated around the Strait of Hormuz, the next signals investors will watch are updates on retail pricing policy and the persistence of under-recoveries.