New Delhi: State-owned oil marketing companies are suffering heavy losses on petrol, diesel and domestic LPG sales as surging crude oil prices outpace unchanged retail fuel rates, according to rating agency ICRA.
Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are estimated to be losing ₹8 per litre on petrol and ₹9 per litre on diesel. Under-recovery on each domestic LPG cylinder stood at approximately ₹300 in September 2026.
ICRA estimated the combined daily loss for these oil marketing companies at nearly ₹530 crore.
West Asia Crisis Drives Crude Higher
Crude oil prices have risen sharply amid escalating geopolitical tensions and supply disruptions across West Asia. Renewed conflict between the US and Iran, disruption of Saudi Arabia’s East-West pipeline and increased Houthi activity in the Red Sea have affected global oil supplies.
The Indian crude oil basket climbed to $117.4 per barrel on September 21, compared with an average of nearly $66 during FY26.
Despite the pressure on fuel-marketing margins, refining economics remain relatively supportive. Singapore gross refining margins have remained above $10 per barrel since the West Asia crisis intensified, helped by refinery outages, lower inventories and supply constraints.
Borrowing Requirements May Rise
ICRA warned that elevated crude and petroleum-product prices could weaken the profitability and cash flows of state-run oil companies. Their short-term borrowing requirements may also increase as additional funds are needed to finance working capital.
The earnings impact during FY27 will depend on crude prices, product cracks, domestic fuel-price revisions and possible government compensation for LPG under-recoveries.
LPG Losses Add Pressure
The cumulative negative LPG buffer reached ₹61,940 crore as of June 30. Losses were estimated at around ₹500 per domestic cylinder during the first quarter of FY27 before easing to nearly ₹300 in September.
Export levies are another challenge. From September 16, the Special Additional Excise Duty stood at ₹20 per litre on diesel and ₹15 per litre on aviation turbine fuel.
