OMCs Absorb Losses Amid Crude Spike

State-run oil marketing companies (OMCs) are facing steep under-recoveries as global crude prices surge past $113 per barrel, up from ~$70 last year. According to the petroleum ministry, OMCs are losing ₹20 per litre on petrol and ₹100 per litre on diesel, even as retail prices remain unchanged since March 2024. The government has cut excise duty by ₹10 per litre to shield consumers, absorbing volatility amid geopolitical disruptions in West Asia. Current Situation Retail fuel prices: Petrol: ₹94.77/litre (Delhi). Diesel: ₹87.67/litre. OMC losses: ~₹20/litre on petrol, ~₹100/litre on diesel. Premium fuels: Prices raised for premium petrol/diesel (~4% of sales) and industrial diesel. Private refiners: Nayara and Shell have already hiked prices at their ~8,500 outlets. Government Measures Excise duty cut of ₹10/litre on 27 March to absorb global price swings. Retail prices kept stable despite crude volatility, especially during ongoing assembly elections. Ministry emphasized consumer protection as priority, denying speculation of a ₹28/litre hike post-polls. Macro Impact India imports ~90% of oil needs. Every $1/barrel increase adds ~₹16,000 crore annually to the import bill. FY25 oil import bill: $137 billion. Geopolitical risks: Strait of Hormuz blockade by Iran and US naval actions constraining ~20% of global oil/gas flows. OMC Profitability Context FY25: subdued crude ($60–70/barrel) allowed OMCs to post strong profits (~₹34,000 crore combined net profit in H1FY25). FY26: sharp reversal with losses as crude spiked. Conclusion India’s OMCs are caught between volatile global crude prices and government price stability measures. While excise cuts and unchanged retail prices shield consumers, under-recoveries weigh heavily on OMCs’ profitability. With geopolitical risks persisting, the balance between fiscal burden, consumer protection, and corporate health will be critical in FY27.