India’s public sector oil marketing companies (OMCs) are incurring losses of around ₹500 crore every day, despite four rounds of petrol and diesel price hikes carried out within just 10 days in May. The cumulative increase of about ₹7.5 per litre was implemented to partly offset the impact of soaring global crude oil prices triggered by the continuing West Asia conflict.

According to Union Petroleum and Natural Gas Minister Hardeep Singh Puri, India has managed the fuel price crisis better than most countries. He recently stated that India ranks second only to Japan among the world’s 193 countries in terms of the lowest increase in fuel prices and that domestic petrol and diesel prices have remained relatively stable despite elevated crude oil prices and geopolitical tensions.

Yet industry experts believe that the recent fuel price increases may not be sufficient if crude oil prices remain elevated for an extended period.

“At a crude price of $105-110 per barrel and considering the past 10-year average crack spreads of auto fuels, oil marketing companies incur a loss of about ₹500 crore daily on the sale of auto fuels and domestic LPG, even after factoring in the recent fuel price hikes. Accordingly, the OMCs would need to relook at retail prices in case elevated crude oil prices persist,” says Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Ltd.

The possibility of further fuel price hikes, however, raises an important question: Are India’s state-owned OMCs really in such dire financial straits that they must immediately pass on losses to consumers, especially considering their robust financial performance over the past several years?

Stellar performance in FY26 and before

India’s largest oil marketing company, Indian Oil Corporation Ltd (IOC), reported a consolidated net profit of ₹43,677.32 crore in FY26, a massive 216.7% increase over the previous fiscal year.

IOC commands nearly half of India’s petroleum products market and supplies around 31% of the country’s refining capacity. The company processes more than 75 million metric tonnes (MMT) of crude oil annually to meet domestic demand.

The sharp jump in profits was driven by record operational performance, including the highest-ever refinery throughput of 75.5 MMT, expanded refining and marketing margins, and inventory gains arising from crude oil procured before geopolitical tensions in West Asia pushed up global prices. During FY26, IOC achieved its highest-ever annual crude throughput and pipeline throughput, operating at 107.4% of its installed capacity.

The favourable earnings environment was also aided by relatively soft crude oil prices during calendar year 2025. Global crude oil supply exceeded demand, resulting in a steady decline in prices. According to data from the U.S. Energy Information Administration (EIA), Brent crude prices fell from a monthly average of $79 per barrel in January 2025 to $63 per barrel in December, the lowest monthly average since early 2021. The annual average price stood at $69 per barrel, the lowest since 2020.

Despite fluctuations in global crude prices, inventory valuation adjustments and varying Gross Refining Margins (GRMs), IOC has consistently maintained healthy profitability over the past five years. Its consolidated net profits stood at ₹12,962 crore in FY25, ₹39,619 crore in FY24, ₹8,242 crore in FY23, ₹24,184 crore in FY22 and ₹21,836 crore in FY21.

Bharat Petroleum Corporation Ltd (BPCL) also posted a strong financial performance in FY26. The company reported a consolidated profit after tax of ₹25,843 crore, representing a 93.78% increase over ₹13,337 crore recorded in FY25.BPCL’s refinery throughput reached a record 41.15 MMT during FY26, compared with 40.51 MMT in FY25, while capacity utilisation touched an impressive 117%.

Like IOC, BPCL has demonstrated sustained profitability over the years. The company’s consolidated net profit stood at ₹25,843.45 crore in FY26, ₹13,336.55 crore in FY25, ₹26,673.50 crore in FY24, ₹2,131 crore in FY23 and ₹11,682 crore in FY22.

Hindustan Petroleum Corporation Ltd (HPCL), the third state-owned OMC, also delivered a stellar performance. The company reported a consolidated net profit of ₹18,046.89 crore in FY26, marking a 168% increase from ₹6,735.70 crore in FY25. HPCL recorded its highest-ever refinery throughput of 26.04 MMT during the year, about 3% higher than the previous fiscal.

Not windfall profits

Industry experts caution against viewing these earnings as extraordinary or excessive profits.

''Oil marketing companies operate in a high-volume commodity business where margins are relatively thin. Marketing margins typically range between ₹8 and ₹10 per litre, while companies have to absorb losses whenever crude oil prices become highly volatile,'' says an OMC official.

Moreover, India imports more than 85% of its crude oil requirements, forcing refiners to pay for crude purchases upfront. Rising crude prices significantly increase working capital requirements, freight expenses and financing costs. Profits generated during favourable market conditions are ploughed back to service debt, fund refinery expansions, strengthen infrastructure and meet operational expenses.

Industry observers also point out that Indian OMCs have not fully passed on international crude oil price movements to consumers since the outbreak of the Russia-Ukraine conflict in 2022, absorbing part of the burden themselves during periods of elevated global prices.

They also note that the sale of petroleum products is a major revenue earner for the Governments, though it is taxed outside the purview of GST. The Union Government collects more than ₹3-4 lakh crore annually through central excise duties, cesses and dividends from OMCs. State governments levy additional Value Added Tax (VAT) and sales taxes, which vary across states and contribute significantly to retail fuel prices.

As geopolitical tensions continue to keep global crude oil markets on edge, the challenge for policymakers and oil companies is balancing consumer interests with the financial sustainability of India’s fuel retailers.