Oil stocks rise up to 4% as govt hikes LPG prices, excise duty on petrol, diesel

Shares of oil marketing companies (OMCs) witnessed an upward trend on Tuesday, in sync with the broader market, as sentiment was lifted after the government raised the price of household LPG and the special excise duty on petrol and diesel. The central government has hiked petrol and diesel excise duties by ₹2 per litre each, and domestic LPG price by ₹50 per cylinder, which is expected to offset some losses of the OMCs.

In the oil and gas space, Hindustan Petroleum Corporation (HPCL) was the top gainer, rising up to 4%, followed by Bharat Petroleum Corporation (BPCL), GAIL India, Oil and Natural Gas Corporation (ONGC), which climbed in the range of 2-3%. Among others, Indraprastha Gas (IGL), Oil India Ltd (OIL),  Indian Oil Corporation (IOC), and Petronet LNG rose up to 2%.

Among private players, Reliance Industries and Adani Total Gas shares surged 1.8% and 3.5%, respectively.

Meanwhile, the BSE oil & gas index and Nifty Oil & Gas Index were up 2% each, while the equity benchmarks Sensex and Nifty were trading higher by 1.6%, at the time of reporting.

In the overnight trade, brent crude oil prices settled near the $61 per barrel mark in a highly volatile session after U.S. President Donald Trump’s administration threatened to impose additional tariff on China and shot down rumors of a 90-day tariff pause. Adding to the woes, sharp selling in global equities amid rising recession fears also dragged down oil prices to lose almost 14% this month.

LPG price hike positive for OMCs, say analysts

Taking advantage of the recent fall in Brent price to $ 64/bbl, the government has hiked the excise duty on auto fuel prices by ₹2/ltr, which will be absorbed by OMCs. This will boost the centre’s revenue by around ₹33,000 crore on an annualised basis. As per report, the oil ministry could use revenue accretion from excise duty for compensating OMCs for their LPG losses.

The hike in the excise duty on auto fuel prices is “sentimentally” negative for OMCs, said JM Financial in a report, adding that it would have minimal impact. Despite the price hike, OMCs’ auto fuel gross marketing margin (GMM) is still high at ₹12/ltr versus historical ₹3.5/ltr, at spot Brent price of $64/bbl.

On the impact of domestic LPG price hike, the brokerage said that this is positive for OMCs as it will reduce their losses by ₹10,000 crore. OMCs’ LPG losses could decline further to ₹20,000 in FY26 (vs. ₹41,300 in FY25), aided by lower Brent price-led decline in global LPG prices, it added. 

Echoing the same, Motilal Oswal in a report said the increase in excise duty on petrol and diesel will affect OMCs’ marketing margins, but it may not impact the brokerage’s earnings estimates. “We do not expect any impact on our earnings estimates as the current marketing margins, averaging above ₹10/lit, are significantly above our assumption of ₹3.3/lit for both petrol and diesel.”

Additionally, the price increase of ₹50 per domestic LPG cylinder will bring down LPG under-recovery from ₹189/cyl to ₹144/cyl, given stable propane prices, the brokerage said in its report.

Emkay Global also highlighted in its report that these steps are positive for OMCs as the excise hike is reasonable and current blended autofuel gross marketing margin at $65 Brent is still at ₹11-12/ltr; implying a ₹7/ltr premium over normative ₹4-5/ltr levels.

“This translates into over ₹1 lakh crore of autofuel over-recoveries in FY26 which would significantly exceed our projected LPG under-recoveries of less than ₹40,000 crore by over ₹60,000 crore. This implies a ₹3-4/ltr autofuel marketing margin cushion, which provides comfort up to $75/bbl of Brent, beyond which normative earnings (PAT + depreciation = Capex + dividend) would be impacted,” it added.

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