Image used for representational purposes. File
| Photo Credit: K.V.S. Giri
About ₹1,600-1,700 crore per day, over ₹1 lakh crore in 10 weeks. That’s the cost that state-owned oil firms incur for insulating Indian consumers from the global energy shock but ever-widening losses are now raising questions on how long they can continue bearing the cost without financially capitulating.
Since the war broke out in West Asia 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 ₹1,600 crore to ₹1,700 crore daily, they said, adding total under-recovery for the 10 weeks is now well over ₹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 ₹94.77 a litre and ₹87.67 per litre respectively. Domestic cooking gas LPG prices were raised in March by ₹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% 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% of crude oil (raw material for making petrol and diesel), 90% cooking gas LPG and 65% natural gas (used to generate electricity, make fertiliser, turned into CNG and piped to household kitchens for cooking).
While the three OMCs have worked overtime to keep the supply lines running even when demand spiked due to panic buying, the government intervention included excise duty reductions to absorb part of the fuel cost burden. The special additional excise duty on petrol was cut to ₹3 per litre from ₹13, while excise duty on diesel was reduced to zero from ₹10 per litre.
The government has taken a hit of ₹14,000 crore a month in cutting the excise duty, sources said.
Published – May 10, 2026 03:51 pm IST
