Should Petrol, Diesel Prices Go up by Rs 25 per Litre? Oil Companies Are Staring at Rs 1,380 Crore Daily Loss

Why It Matters

Sustained daily losses could force OMCs into severe financial distress, prompting further fuel price hikes or fiscal interventions that will ripple through India’s transport, logistics and inflation outlook.

Key Takeaways

• Daily OMC losses equal roughly $166 million, or Rs 1,380 crore.
• HPCL could exhaust equity in just two years at current losses.
• Rs 3 per litre hike may cut losses by $4.2 billion annually.
• Government SAED revision offsets about Rs 27.6 per litre diesel under‑recovery.
• IOCL viewed as least vulnerable due to lower marketing exposure.

Pulse Analysis

The Indian government’s recent Rs 3 per litre increase in petrol and diesel was intended to narrow a widening Rs 25 per litre margin gap, yet oil‑marketing companies (OMCs) remain in the red. Analysts at Nomura calculate a daily loss run of Rs 1,380 crore ($166 million), driven by under‑recoveries on both auto‑fuels and LPG. This mirrors the 2022 post‑Ukraine‑invasion shock, when incremental price hikes were required to restore marketing margins that had turned deeply negative. The current loss trajectory underscores the fragility of OMC earnings amid volatile crude prices and a still‑elevated rupee‑dollar exchange rate.

Company‑specific stress varies sharply. HPCL, with the highest retail exposure, is projected to lose $19 per barrel on an integrated basis and could deplete its equity in roughly two years if the trend persists. BPCL and IOCL face smaller, yet still significant, deficits of $8 and $4 per barrel respectively. LPG under‑recoveries exacerbate the squeeze, costing up to Rs 400 crore ($4.8 million) daily. Analysts suggest that without further price adjustments or additional fiscal support, the OMCs’ balance sheets will erode, potentially prompting a second wave of modest hikes to safeguard profitability.

Policy responses have been mixed. The reinstated Special Additional Excise Duty (SAED) on diesel, now Rs 16.5 per litre, partially offsets the Rs 27.6 per litre under‑recovery but applies only to volumes exceeding each refiner’s own output. A Rs 10 per litre excise‑duty cut offers temporary relief but may be reversed as crude prices stabilize. Despite the crisis, OMC stocks trade at premiums, notably HPCL at a 77 % uplift from early‑war levels, reflecting market optimism about eventual margin recovery. Investors will watch closely for further regulatory tweaks and the pace of price hikes, as these will shape India’s fuel cost trajectory and broader inflation dynamics.