New Delhi: State-owned oil companies are currently absorbing losses of around Rs 1,600–1,700 crore every day—adding up to over Rs 1 lakh crore in just 10 weeks—to shield Indian consumers from global energy price shocks. However, these mounting losses are increasingly raising concerns about how long they can sustain this burden before it begins to strain their financial stability. Since the war broke out in the Middle East 10 weeks ago, state-owned oil marketing companies (OMCs) have ensured uninterrupted supplies of petrol, diesel and cooking gas LPG at rates that are way below cost, unlike many global energy systems that imposed rationing or passed through steep price increases.
This has resulted in the three OMCs – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) – running record high under-recoveries (the difference between cost and retail selling price), two sources with direct knowledge of the matter said.
The combined under-recovery on petrol, diesel and cooking gas LPG is Rs 1,600 crore to Rs 1,700 crore daily, they said, adding total under-recovery for the 10 weeks is now well over Rs 1 lakh crore.
Despite a 50% surge in input crude oil prices, petrol and diesel continue to be priced at a two-year-old rate of Rs 94.77 a litre and Rs 87.67 per litre respectively. Domestic cooking gas LPG prices were raised in March by Rs 60 per cylinder, but they are still way lower than the actual cost.
The revenues that OMCs earn from selling fuel are the only source that is used by them to buy crude oil (raw material), build infrastructure to process it into fuel and lay a network to take the product to consumers.
For 10 weeks, the OMCs have managed to insulate the Indian market but now the cost is visible, sources said adding they may have to borrow more to meet the working capital requirement (buying of crude oil).
“If elevated crude prices persist for an extended period, OMCs may require higher working capital borrowings and calibrated reprioritisation of some capex timelines,” a source said. “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..
Another source said the OMCs are operating under significant financial pressure. “Financially strong OMCs are critical for India’s energy security, supply continuity, infrastructure expansion, and economic stability. Sustained stress on OMC balance sheets could affect future investments in refining, pipelines, strategic reserves, clean fuels, and energy transition initiatives.”.
To raise petrol and diesel prices is now a political call that the government will have to take, a separate source said. “There is no doubt that a fuel price hike has become inevitable, but the timing and quantum of increase have to be decided by the government..
While countries from Japan to the United Kingdom have raised petrol and diesel prices by up to 30 per cent since the start of the West Asia conflict, fuel prices in India continue at two-year-old levels.
This despite the war disrupting India’s import of 40 per cent of crude oil (raw material for making petrol and diesel), 90 per cent cooking gas LPG and 65 per cent natural gas (used to generate electricity, make fertiliser, turned into CNG and piped to household kitchens for cooking).
