₹30,000 Cr monthly hit for OMCs: How long can the Govt hold back fuel price hikes?

Oil Marketing Companies (OMCs) in India are currently absorbing a staggering financial blow of at least ₹30,000 crore every month due to massive under-recoveries on petrol, diesel, and LPG. During an Inter-Ministerial briefing in New Delhi on the West Asia crisis, Sujata Sharma, Joint Secretary, Ministry of Petroleum and Natural Gas (MoPNG), revealed the sheer scale of the crisis. “OMCs are buying Crude, LPG, and Natural Gas at very high levels,” Sharma stated, noting that despite the international spike, the government has ensured “uninterrupted supply to domestic households” and “no rationing of petrol or diesel.”

However, with OMCs absorbing these mounting input costs, the sustainability of maintaining current retail prices is under severe pressure.

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The financial strain is exacerbated by the fact that crude oil prices have spiked from $70 to over $120 per barrel in international markets due to the ongoing volatility in West Asia.

Sujata Sharma highlighted that while the international market is seeing unprecedented price swings, India has taken aggressive measures to protect the common man. “We have protected our Indian consumers throughout the West Asia Crisis,” she noted. To achieve this, the government has been absorbing a revenue loss of approximately ₹14,000 crore per month after cutting excise duties to reduce the immediate financial burden on OMCs.

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This strategy of price insulation stands in sharp contrast to global trends recorded by agencies like the International Energy Agency (IEA) and the IMF. While India has kept retail prices largely static, other nations have been forced to pass on the volatility to consumers, with many seeing fuel price hikes exceeding 40%.

According to global energy tracking data, countries across Europe and Southeast Asia have adjusted retail rates multiple times in the last quarter to keep their energy companies solvent. In contrast, India has focused on internal reallocations, such as gasifying PNG connections for over 7 lakh consumers and allocating 70% of LPG supply to commercial establishments to prioritize domestic needs.

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Despite these protective measures, the long-term health of India’s energy infrastructure remains a concern. Sharma pointed out that the industry is capital-intensive, with close to ₹1,30,000 to ₹1,50,000 crore invested annually in capex for capacity expansion, including major projects like the Numaligarh and Barmer refineries.

“Upstream, Midstream and Downstream companies are investing in capex every year,” she said, emphasizing that these expansions are vital for energy security. However, as under-recoveries mount to ₹30,000 crore monthly, the gap between the cost of imports and domestic retail prices may soon force a policy shift to prevent the financial destabilization of the country’s primary fuel suppliers.

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