Oil firms face Rs 530 crore daily fuel losses as crude surges: ICRA

State-run oil marketing companies are facing mounting losses on petrol and diesel sales as a surge in crude prices outpaces unchanged domestic fuel prices, rating agency ICRA said.

Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) are losing Rs 8 a litre on petrol, and Rs 9 on diesel, while under-recoveries on domestic liquefied petroleum gas (LPG) stood at about Rs 300 per cylinder, ICRA said.

"At these levels, the daily loss to the OMCs is estimated at Rs 530 crore," ICRA said.


Crude oil prices have risen sharply in recent weeks amid escalating geopolitical tensions and supply disruptions in West Asia. The surge was driven by renewed US-Iran conflict, the shutdown of Saudi Arabia's East-West pipeline and heightened Houthi activities in the Red Sea.

The price of the basket of crude oil India imports rose to USD 117.4 per barrel as on September 21, 2026, from the 2025-26 average of around USD 66 a barrel.

"The escalation of the West Asian conflict and disruptions to key oil supply routes have led to a spike in crude prices," Prashant Vasisht, senior vice president and co-group head of corporate sector ratings at ICRA, said in the report.

The pressure on fuel marketers comes even as refining margins remain relatively strong. Singapore gross refining margins have stayed above USD 10 a barrel since the start of the West Asia crisis, supported by refinery outages, supply disruptions and inventory drawdowns, ICRA said.

The higher crude and product prices are nevertheless expected to weigh on OMC profitability and cash flow, while increasing their short-term borrowing needs to fund working capital, ICRA said.

The impact on earnings in the 2026-27 financial year will depend on crude prices, product cracks, domestic retail price revisions and government support for LPG under-recoveries, it said.

LPG is another growing source of pressure. The cumulative negative LPG buffer reached Rs 61,940 crore as of June 30, after international LPG prices rose following supply disruptions in West Asia.

ICRA estimated the loss on each domestic cylinder at about Rs 500 in the first quarter of 2026-27 and around Rs 300 in September.

Export levies introduced on diesel and aviation turbine fuel in March and subsequently extended to petrol have also remained elevated. The Special Additional Excise Duty on diesel stood at Rs 20 a litre and on ATF at Rs 15 a litre from September 16, ICRA said.

"Elevated crude prices and unchanged domestic fuel prices would put pressure on profitability and cash flows of oil marketing companies (OMCs). The same would also elevate their short-term borrowings for increased working capital requirements. The impact on OMCs' earnings in 2026-27 will depend on crude prices, product cracks, retail price revisions and government support for LPG under-recoveries," Vasisht said.

"With domestic retail prices remaining unchanged so far, the marketing margins of OMCs were estimated at negative Rs 8 per litre on petrol and negative Rs 9 a litre on diesel, while domestic LPG under-recoveries stood at around Rs 300 per cylinder in September 2026," he added.