OMCs push for increase in LPG, petrol, diesel, ATF prices as losses mount

New Delhi: Pressure is mounting on the government to raise pump prices after crude surged past $126 a barrel on Thursday, a spike that will further widen losses at state-run oil marketing companies (OMCs) reeling from the effects of the Gulf war.

Crude shot up after US President Donald Trump signalled on Wednesday an extended naval blockade of Iran, pointing to prolonged disruption of the Strait of Hormuz and a tighter global supply outlook.

With voting in states concluded, OMCs are pushing for a quick pass-through of higher global prices to consumers, people familiar with the matter said. They are incurring losses on petrol, diesel, aviation turbine fuel and LPG and want approval to raise retail prices.


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The government is unlikely to move quickly, despite a strong case for a hike, one person said, especially given speculation that had attributed the freeze in pump prices to elections.

“International prices have been volatile and have risen steeply, but it has been the government’s effort to ensure that consumers face the least problem--that’s why our prices are stable,” Sujata Sharma, joint secretary in the ministry of petroleum and natural gas, said on Thursday. “The impact on (oil marketing companies) will be known with time.”

On Tuesday, she had denied any plan to raise pump prices from May 1.

Prices will eventually have to rise as OMCs cannot sustain such losses for long and may seek compensation from the government, as in the past, people in the know said.

With LPG and fertiliser subsidies already swelling, the government is reluctant to absorb petrol and diesel under-recoveries, given the potential hit to public finances.

Raising prices would ease OMC finances but that risks stoking inflation and would weigh on growth.

In global markets, average diesel and petrol prices in April were 119% and 69% higher than in February. LPG prices rose over 40%, while ATF prices doubled. Brent for June delivery, which expired on Thursday, rose above $126 a barrel, while July futures traded at around $114, as of press time. Before the war that started February 28, Brent was at about $73 per barrel.

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Brent’s monthly average has exceeded $120 a barrel in just six months on record—three during the run-up to the 2008 global financial crisis, and most recently in June 2022 after the outbreak of the Ukraine war.

Domestically, OMCs have selectively raised prices. Prices of premium petrol, bulk diesel and ATF for international flights have been sharply increased in line with global trends. In contrast, regular pump prices for petrol and diesel remain unchanged, ATF for domestic airlines has been only partially raised, and LPG prices have increased by just ₹50 per cylinder.

The initial bet after the war-driven price surge was that OMCs could absorb losses, cushioned by strong profits in recent years. Lower crude and elevated retail prices had helped them post robust earnings and dividends. But with no quick end to the Gulf crisis in sight, a pump price hike may be unavoidable, people familiar with discussions between the government and OMCs said.