₹1,600 1,700 crore a day: OMCs lose over ₹1 lakh crore shielding India from fuel price shock

State-owned oil marketing companies are incurring under-recoveries of about Rs 1,600 crore to Rs 1,700 crore a day, or well over ₹1 lakh crore in 10 weeks, as they shield Indian consumers from the global energy shock, PTI reported quoting sources. The rising losses are now raising questions on how long they can continue to bear the burden without coming under severe financial strain.

Since the war broke out in West Asia 10 weeks ago, Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd have ensured uninterrupted supplies of petrol, diesel and cooking gas LPG at rates that remain well below cost, unlike many global energy systems that either imposed rationing or passed on steep price increases. The three state-owned firms are now running record-high under-recoveries on petrol, diesel and LPG, as per the report.

Despite a 50% surge in input crude oil prices, petrol and diesel continue to be sold at two-year-old rates of ₹94.77 a litre and ₹87.67 per litre, respectively. Domestic LPG prices were raised by ₹60 per cylinder in March, but they remain well below the actual cost.

The revenues earned from fuel sales are the only source used by the OMCs to buy crude oil, build infrastructure to process it into fuel and create networks to take the product to consumers. After insulating the Indian market for 10 weeks, the cost is now visible, adding that the companies may have to borrow more to meet working capital needs for crude purchases, the report added.

If elevated crude prices persist for an extended period, OMCs may require higher working capital borrowings and calibrated reprioritisation of some capex timelines. However, strategic investments in refining expansion, energy security infrastructure, ethanol blending, biofuels, and transition fuels continue to remain national priorities and are expected to proceed with government support.

While countries from Japan to the United Kingdom have raised petrol and diesel prices by up to 30% since the start of the West Asia conflict, fuel prices in India have remained at two-year-old levels. This is despite the war disrupting India’s import of 40% of crude oil, 90% of cooking gas LPG and 65% of natural gas, which is used to generate electricity, make fertiliser, and as CNG and piped cooking gas for households.

The three OMCs have also kept supply lines running when demand rose because of panic buying. The government intervention included cuts in excise duty to absorb part of the fuel cost burden. The special additional excise duty on petrol was reduced to ₹3 per litre from ₹13, while excise duty on diesel was cut to zero from ₹10.

As per the report the government is taking a hit of ₹14,000 crore a month because of the excise duty reductions. Even as the OMCs have kept petrol, diesel and LPG supplies uninterrupted and retail rates unchanged, their under-recoveries have crossed ₹1 lakh crore in 10 weeks, bringing their financial pressure into sharper focus.