- Fuel retailers face significant losses as prices remain frozen.
- Rising global crude oil prices increase input costs substantially.
- Government intervention eased daily losses but did not eliminate them.
India’s state-run fuel retailers are facing mounting financial pressure as petrol and diesel prices at the pump remain unchanged despite a sharp surge in global crude oil prices.
The widening gap between retail prices and input costs is now translating into significant losses for oil marketing companies (OMCs), raising questions over future fuel pricing and fiscal implications.
Losses Mount As Prices Stay Frozen
According to industry sources cited by PTI, losses on petrol have widened to around Rs 18 per litre, while diesel losses have surged to approximately Rs 35 per litre. This comes as state-owned oil marketing companies, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) continue to hold retail prices steady.
Despite the formal deregulation of fuel prices, petrol and diesel rates have not been revised since April 2022, even as global oil markets have witnessed sharp volatility.
Crude Oil Volatility Driving Pressure
Global crude prices have fluctuated significantly over the past two years. Prices remained above $100 per barrel following the Russia-Ukraine conflict, later eased to around $70 earlier this year, and then surged again to nearly $120 last month amid fresh geopolitical tensions linked to US-Israel actions on Iran.
The latest rally in crude prices has sharply increased input costs for Indian refiners, exacerbating under-recoveries on fuel sales.
Also Read : LPG Cylinder Price Today: Delhi Rs 913, Mumbai Rs 912.5; Check City-Wise Rates
Daily Losses And Government Intervention
At the peak of the recent oil price surge, OMCs were incurring losses of nearly Rs 2,400 crore per day, which have since moderated to around Rs 1,600 crore daily following government intervention.
The government cut excise duty on petrol and diesel by Rs 10 per litre in March. However, the benefit was not passed on to consumers and was instead used by OMCs to partially offset mounting losses.
Even with this support, the losses incurred in March have wiped out gains made earlier in the year, particularly during January and February.
Macquarie Flags Continued Stress
A report by Macquarie Group on India’s fuel retail sector highlights the scale of the challenge. At crude prices ranging between $135 and $165 per barrel, OMCs are estimated to lose Rs 18 per litre on petrol and Rs 35 per litre on diesel sales.
The report also notes that every $10 per barrel increase in crude oil prices adds roughly Rs 6 per litre to marketing losses, underlining the sensitivity of the sector to global price movements.
Macquarie further warned of a high likelihood of fuel price hikes after state elections, suggesting that the current freeze may not be sustainable in the long term.
India’s Dependence On Imported Crude
India remains highly exposed to global oil price fluctuations, importing nearly 88 per cent of its crude oil requirements in 2025.
Around 45 per cent of imports come from West Asia, followed by 35 per cent from Russia and 6 per cent from the United States. This dependence makes the domestic fuel market particularly vulnerable to geopolitical developments.
Interestingly, despite heavy reliance on crude imports, India continues to be a net exporter of petroleum products such as diesel, petrol and aviation turbine fuel.
Fiscal Constraints Limit Policy Options
While the government has already reduced excise duties, further tax cuts may be constrained by fiscal considerations.
Central levies currently stand at Rs 11.9 per litre on petrol and Rs 7.8 per litre on diesel, significantly lower than previous levels. However, even a complete removal of excise duties may not fully offset OMC losses at current crude prices, according to the Macquarie report.
A full rollback of excise duties could lead to an annual revenue loss of approximately $36 billion, potentially widening the fiscal deficit by around 80 basis points.
The contribution of fuel excise duties to government revenue has also declined sharply, from 22 per cent in FY17 to about 8 per cent in FY26, reducing its role in supporting fiscal balances.
External Risks And Market Impact
Rising crude prices also pose risks to India’s external balances. The current account deficit, which was nearly balanced in mid-2025, is expected to widen to around $20 billion in the first quarter of 2026.
Macquarie estimates that a sustained $10 per barrel increase in crude prices could expand the deficit by around 30 basis points of GDP, assuming no policy response.
Additionally, earnings visibility for OMCs remains uncertain, with every $1 per barrel change in crude prices impacting EBITDA by about 5 per cent. The sector’s break-even crude price is estimated at $80-85 per barrel.
Also Read : Rs 1.80 Lakh Monthly Salary Offer As 8th Pay Commission Meetings Begin
What Lies Ahead For Fuel Prices
With mounting losses and limited fiscal space, the current fuel price freeze may not be sustainable indefinitely.
Analysts expect that retail fuel prices could see an upward revision once political and economic conditions allow, particularly after key state elections.
For consumers, this suggests that while prices remain stable for now, the risk of future hikes cannot be ruled out if global crude prices stay elevated.
