State-run oil marketing companies (OMCs) continue to face intense pressure on margins despite the latest increases in petrol and diesel prices, with under-recoveries on fuel sales remaining at unsustainably high levels, according to ICRA.

The latest revision in retail fuel prices — the fourth hike since May 15 — has pushed petrol prices above ₹100 per litre in Delhi and brought diesel prices in several cities close to the three-digit mark. However, analysts believe the recent increases are still inadequate to fully compensate OMCs for mounting losses caused by elevated crude prices, domestic LPG subsidies and a weak rupee.

“Despite the latest hike in retail prices of auto fuels, oil marketing companies' under-recoveries remain stubbornly high due to increasing losses in domestic LPG sales and a high premium to the crude marker,” said Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Ltd.

OMC losses remain steep despite fuel price revisions

ICRA estimates that at crude oil prices of $120-125 per barrel, OMCs are currently losing around ₹700-800 crore per day on the sale of petrol, diesel and domestic LPG, even after factoring in the latest fuel price hikes.

“This high level of under-recoveries is unsustainable,” Vasisht added.

Petrol and diesel prices have now risen cumulatively by nearly ₹7.5 per litre over the past two weeks. In Delhi, petrol prices climbed to ₹102.12 per litre, while diesel rose to ₹95.20 per litre after the latest revision.

Mumbai continued to record the highest fuel rates among metros, with petrol priced at ₹111.21 per litre and diesel at ₹97.83 per litre. In Kolkata, diesel prices edged closer to the ₹100 mark at ₹99.82 per litre, while Chennai saw diesel prices rise to ₹99.55 per litre.

Industry trackers expect more hikes if crude stays elevated

Brokerages believe additional retail fuel price hikes may be inevitable if global crude oil prices remain elevated over the coming months.

According to a recent report by Systematix, the latest increase in fuel prices offsets only 7-8% of the cumulative under-recoveries accumulated during nearly three months of unchanged retail prices. The brokerage estimated total industry-wide losses at ₹1.7-1.8 lakh crore.

Emkay Global also expects further upward revisions in fuel prices, estimating that petrol and diesel prices could rise by another ₹18-20 per litre over the next three to six months if crude oil sustains above $100 per barrel.

Meanwhile, Brent crude was trading around $98.83 per barrel, down nearly 5% over the past week amid hopes of easing geopolitical tensions and improved stability in global energy supply routes.