- Government offers no financial support to oil companies.
- Companies face large losses on fuel sales.
- Retail prices frozen despite rising global costs.
India’s state-run oil marketing companies (OMCs) are facing mounting financial strain as retail fuel prices remain frozen despite elevated global crude costs, with the government indicating that no financial support is currently under consideration.
No Bailout Plan from the Centre
The Centre has made it clear that there is no proposal to compensate OMCs for losses incurred from selling petrol, diesel and aviation fuel below market-linked prices.
Sujata Sharma, Joint Secretary in the Petroleum Ministry, said on Monday, “The government does not have any proposal that talks about supporting oil marketing companies,” even as pressure on the sector continues to build, reported The Financial Express.
The clarification follows several media reports claiming an end to the fuel price freeze coming soon.
Negative Margins Widen
The pricing mismatch is beginning to show in company balance sheets.
According to rating agency ICRA, OMCs are currently facing negative marketing margins of around Rs 14 per litre on petrol and Rs 18 per litre on diesel at prevailing crude prices.
The strain comes as Brent crude continues to hover around $108 per barrel, while retail fuel prices have remained unchanged since early April 2022.
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Retail Prices Stay Put Despite Rising Costs
Despite a sharp rise in input costs, retail prices of petrol and diesel have not been revised.
Sharma noted that while supply conditions have tightened, there has been no increase in pump prices. “Supplies have been impacted and there is tightness in the market,” she said, underlining the imbalance between costs and retail pricing.
Selective Price Adjustments in Other Segments
While auto fuel prices have remained frozen, OMCs have taken limited pricing action in other segments.
Industrial LPG prices and aviation turbine fuel (ATF) for foreign carriers have been increased, reflecting partial alignment with global market trends.
However, domestic LPG and ATF for Indian carriers continue to remain under price control, adding to the pressure on overall margins.
Market Tightness and Supply Challenges
Global oil markets remain tight amid ongoing supply disruptions, further complicating the outlook for fuel retailers.
The combination of high crude prices and constrained supply has created a challenging environment for OMCs, particularly in the absence of price revisions at the retail level.
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Profitability Under Strain
The continued freeze on petrol and diesel prices is weighing heavily on the profitability of state-run fuel retailers.
Even after recent reductions in excise duty, the gap between input costs and retail prices has widened, forcing companies to absorb significant losses.
With no government relief on the horizon, OMCs are expected to continue bearing the financial burden for now.
