Petrol prices may need 20% hike to cut OMC losses

Why fuel pricing is back in focus

India’s retail petrol and diesel prices have not moved since April 2022, even as global crude prices have risen and geopolitical tensions have tightened supply. That gap is now showing up as under-recoveries for state-run oil marketing companies (OMCs) such as IOC, BPCL and HPCL, which sell fuel below cost when pump prices are frozen. A Moneycontrol analysis says pump prices may need to rise by roughly another 20% from current levels if OMCs are to return to last year’s profit levels. The same set of estimates also underlines a practical constraint: even meaningful hikes do not fully close the loss pool when crude stays elevated.

What the Moneycontrol arithmetic shows

Moneycontrol’s modelling ties OMC losses directly to the crude price and the retail price gap. The analysis flags that if crude rises to around $125 per barrel, under-recoveries would widen sharply. It describes $125 per barrel as about 9.7% above current levels and 76% higher than in July 2025. At that crude level, the implied losses rise to ₹24.38 per litre on petrol and ₹31.44 per litre on diesel. That compares with estimated current under-recoveries of ₹15.62 per litre on petrol and ₹22.68 per litre on diesel.

Dealer petrol price has already moved

The same Moneycontrol material points out that pricing pressure is already visible in parts of the system. The dealer price of petrol has risen to ₹74.97 per litre, which is exactly ₹22.88 higher than in July 2025. While retail pump prices for the general public have stayed unchanged, these moves reinforce the mismatch between global inputs and domestic selling prices.

Monthly under-recoveries and why small hikes matter less

On a monthly basis, the current under-recovery pool is large even under conservative assumptions. Monthly under-recoveries on petrol and diesel are estimated at around ₹55,416 crore, assuming losses of ₹14 per litre on petrol and ₹42 per litre on diesel. Moneycontrol’s calculations show that modest hikes reduce the pool, but do not eliminate it. A ₹2 per litre increase in petrol prices would reduce total monthly under-recoveries to ₹52,105 crore. A ₹4 per litre rise would lower losses to ₹48,794 crore. Even a ₹10 per litre increase would still leave under-recoveries of nearly ₹38,863 crore.

Key figures at a glance

How much does a pump hike reduce the loss pool?

Moneycontrol’s examples quantify how quickly the arithmetic scales in rupee terms. The monthly pool moves down with each incremental hike, but remains sizeable. The data also reinforces the policy trade-off: each ₹1 increase at the pump creates a direct fiscal or corporate benefit, but the base loss pool is high enough that gradualism can leave OMC balance sheets strained for longer.

What officials and industry voices have said

Former HPCL CMD MK Surana warned that financial stress on fuel retailers is intensifying and could force difficult policy decisions, including a hike in retail fuel prices. He also said the market may not be fully pricing in the severity of crude supply disruption. At the same time, the government has maintained there is “no immediate plan” to raise retail fuel prices, a position reiterated in public briefings. In one inter-ministerial briefing in New Delhi, Joint Secretary in the Ministry of Petroleum and Natural Gas Sujata Sharma said there are “no immediate plans” to hike fuel prices, and confirmed uninterrupted supply with no rationing.

May 15 window, and the range of hike expectations

Several reports converge on a near-term revision window. BusinessToday (citing sources) said petrol and diesel prices could be hiked before May 15, 2026, and that OMCs are collectively absorbing under-recoveries of nearly ₹30,000 crore every month. IndiaToday.in reported expectations that petrol and diesel could rise by ₹4-5 per litre, while LPG cylinder prices may increase by ₹40-50, as the government and oil companies assess elevated crude prices. Separately, people familiar with the matter told media that processors anticipate a hike of about ₹5 per litre for diesel and gasoline to mitigate an estimated fuel sale loss of ₹10 billion a day, while acknowledging this would be well below the ₹15-20 per litre rise needed to meaningfully curb losses.

Other loss estimates: why the numbers vary

The loss-per-litre estimates differ by assumptions on crude, taxes, and marketing margins. Macquarie Group has said that at crude prices between $135-165 per barrel, OMCs lose ₹18 on every litre of petrol and ₹35 on every litre of diesel sold, and that every $10 rise in crude adds another ₹6/litre to losses. ICRA has put losses at ₹14/litre on petrol and ₹18/litre on diesel. Petroleum and Natural Gas Minister Hardeep Singh Puri had also said OMCs were losing around ₹24 per litre on petrol and ₹30 per litre on diesel while retail prices remained unchanged despite crude crossing $100 per barrel.

Bulk and commercial prices have already adjusted

One point highlighted in reporting is that price rigidity is not uniform across all segments. IOC raised bulk diesel prices by ₹22/litre to ₹109.59, and BPCL followed with an ₹18.75/litre increase on bulk diesel. Commercial LPG was hiked by ₹993 from May 1, taking a 19 kg cylinder in Delhi to ₹3,071.50. Premium petrol increased by ₹2-2.35/litre. IOC has said retail petrol, diesel and domestic LPG were “unchanged for the general public,” which accounts for around 90% of total consumption.

Market impact: what the pricing math implies

The immediate market relevance is that prolonged under-recoveries can pressure OMC profitability and cash flows, particularly when crude remains above $100 per barrel. The reported monthly loss pools, whether cited as nearly ₹30,000 crore or estimated at ₹55,416 crore under certain assumptions, are large enough to make the timing and size of hikes financially consequential. The data also shows why policymakers may prefer staggered revisions: smaller steps like ₹2-4/litre reduce losses but can leave a significant residual, while larger one-time hikes may be harder to absorb in inflation-sensitive periods. The underlying constraint remains the same across estimates: when the input cost rises faster than retail prices, the gap compounds each day.

Conclusion

The reported estimates collectively point to a narrowing set of options as crude remains elevated and retail prices stay frozen. Moneycontrol’s modelling suggests a roughly 20% rise may be needed to restore OMC profitability to prior levels, while multiple reports point to smaller near-term hikes around mid-May. Official statements continue to rule out “immediate” action, but the same reporting also signals that a revision window before May 15 is being watched closely for a first round of changes.