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New Delhi: Increased crude oil prices can impact consumers through petrol pump prices, but the financial impact is first felt by the oil marketing companies (OMCs). In the event that retail fuel prices do not rise as quickly as international crude prices, state-owned retail fuel providers could see their marketing margins decline or even go into the red. This is likely to have been the case during the first quarter of FY27 (April–June).
The losses of the three state-owned oil marketing companies—Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation Ltd. (HPCL) in the past quarter have been estimated at ₹18.9 per litre on diesel and ₹6 per litre on petrol, due to domestic retail fuel prices lagging behind higher global product prices.
The losses follow a period of healthy marketing margins enjoyed by the companies during much of the previous financial year, supported by softer crude prices and stable domestic fuel rates.
Higher world prices put margins under pressure
Geopolitical unrest in the Middle East, including worries about potential disruptions to oil supplies through the Strait of Hormuz, one of the world’s busiest oil shipping lanes, caused international crude oil markets to turn volatile during April–June. Brent crude rose from below $65 per barrel to above $80 per barrel before easing.
Fuel prices in most Indian cities remained unchanged while international prices increased. As retail fuel prices were not adjusted in line with global prices, OMCs had to absorb a significant share of the increase in procurement costs.
Marketing losses occur when the cost of purchasing and refining crude oil exceeds the retail selling price after accounting for taxes, freight and dealer commissions, industry analysts explain.
Diesel remains the bigger concern
Diesel is more exposed to commercial demand and pricing pressures than petrol, which explains the larger losses.
A wide range of sectors depend on diesel. According to the Petroleum Planning and Analysis Cell (PPAC), diesel accounts for around 38–40% of India’s total petroleum product consumption, making it the country’s most consumed refined fuel.
Due to its high sales volume, even relatively small changes in marketing margins can significantly affect OMC profitability.
Strong refining operations may provide support
The three state-run OMCs continue to benefit from diversified operations, despite weaker marketing margins.
Apart from fuel retailing, IOC, BPCL and HPCL earn revenue from downstream businesses such as crude oil refining, pipelines, lubricants and petrochemicals. Gross Refining Margins (GRMs) may partially offset weaker retail profitability, depending on global refining conditions.
The companies have also been investing in refinery upgrades, cleaner fuel production, biofuels, green hydrogen and electric vehicle charging infrastructure to support their long-term energy transition goals.
Fuel prices continue to be monitored closely
India imports more than 85% of its crude oil requirement, making the country’s fuel economy highly sensitive to fluctuations in global crude oil prices and exchange rates.
Although petrol and diesel prices have been deregulated, OMCs continue to balance commercial considerations with market stability. As a result, retail fuel prices often adjust more slowly than international crude prices.
Looking ahead, global crude oil prices and geopolitical developments will remain key factors for the sector. If international fuel prices remain elevated without corresponding domestic price revisions, marketing margins could stay under pressure. Conversely, lower crude prices or retail fuel price adjustments could help India’s state-run oil retailers return to stronger profitability in the coming quarters.
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