Fuel Prices In India: Retailers Face Rs 1,600 Crore Daily Losses As Frozen Petrol And Diesel Rates Squeeze Profit Margins

State-owned fuel retailers are now losing about Rs 18 on every litre of petrol and Rs 35 on diesel, as pump rates remain unchanged despite a sharp jump in costs, according to industry sources. Retail prices of both fuels have stayed frozen since April 2022, even though crude oil has swung widely on global markets.

The three public sector oil marketing companies, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), have therefore kept prices steady for consumers for nearly three years. During this period, the companies’ earnings have moved in line with volatile crude costs and periodic tax changes by the central government.

Rising global crude and frozen fuel prices in India squeeze oil retailers

International crude prices first climbed above USD 100 per barrel after the Russia-Ukraine conflict, then eased to around USD 70 earlier this year. Prices have since rebounded to about USD 120 per barrel after the US-Israel attacks on Iran revived concerns over supply disruptions, putting further pressure on fuel prices in India and on company margins.

Industry sources said the three fuel retailers were losing nearly Rs 2,400 crore each day at the height of the recent price spike. Losses have now reduced to around Rs 1,600 crore per day after the Union government reduced excise duty on petrol and diesel by Rs 10 per litre each, a cut that helped offset under-recoveries rather than lower fuel prices in India for motorists.

Brokerage view on fuel prices in India and possible pump hikes

In a report titled 'India Fuel Retail', Macquarie Group quantified the strain on fuel prices in India. The brokerage said, "At spot petrol-diesel pricing of USD 135-165 per barrel, we estimate India's oil marketing companies lose Rs 18 and Rs 35 per litre on petrol and diesel sales (respectively)." It added that every USD 10 per barrel increase in crude raises marketing losses by about Rs 6 per litre.

Macquarie also highlighted political timing when discussing fuel prices in India. The report noted a strong chance of retail hikes once elections in key states such as West Bengal and Tamil Nadu finish at the end of this month. "We see risk of higher pump prices post state elections in April."

Tax tweaks, fiscal impact and fuel prices in India

The government’s March decision to cut excise duty on petrol and diesel by Rs 10 per litre follows a broader trend of lower central taxes on fuel prices in India. Current central levies stand at about Rs 11.9 per litre on petrol and Rs 7.8 per litre on diesel, with state value-added tax rates staying broadly unchanged in most regions.

Even so, Macquarie estimated that scrapping excise completely would still not cover the current losses of OMCs at prevailing fuel prices in India. The brokerage calculated that, based on a provisional fuel consumption of roughly 170 billion litres in FY26, a full excise rollback could erase about USD 36 billion in annual revenue and expand the fiscal deficit by nearly 80 basis points.

The contribution of fuel excise to the central exchequer has already dropped compared with earlier years, despite elevated fuel prices in India. It accounted for about 22 per cent of government revenue in FY17 but is estimated at roughly 8 per cent in FY26. Fuel excise now makes up under one-fifth of the fiscal deficit, down sharply from a peak share of about 45 per cent.

Import dependence, external balances and fuel prices in India

India imported about 88 per cent of its crude oil requirement in 2025, leaving fuel prices in India highly sensitive to global swings. Around 45 per cent of crude imports came from the Middle East, 35 per cent from Russia and 6 per cent from the United States, while the country still exported key products like diesel, petrol and aviation turbine fuel overall.

Crude supplier	Share of India’s imports (2025)
Middle East	45%
Russia	35%
United States	6%

Higher crude costs linked to fuel prices in India also affect the external account. Macquarie said the current account deficit, which was close to balance in mid-2025, is expected to widen to about USD 20 billion in the first quarter of 2026. A lasting USD 10 per barrel rise in crude could add around 30 basis points of GDP to this deficit, assuming no policy change.

Earnings outlook for the three OMCs remains clouded while fuel prices in India stay frozen and crude remains volatile. Macquarie estimated that every USD 1 per barrel move in crude shifts sector EBITDA by roughly 5 per cent, with break-even seen at about USD 80-85 per barrel. Given this backdrop, the brokerage said it prefers utilities over oil marketing companies for near-term investment exposure.

FAQs

Why have pump prices in India remained unchanged for nearly three years?

Public sector oil retailers kept retail prices steady despite rising costs, with prices frozen since April 2022.

What losses do the oil marketing companies incur per litre on petrol and diesel at higher crude prices?

They lose about Rs 18 per litre on petrol and Rs 35 per litre on diesel when crude is around USD 135–165 per barrel.

What effect did the government’s excise duty cut have on pump prices and under-recoveries?

A Rs 10 per litre cut on petrol and diesel helped offset under-recoveries but did not lower pump prices for motorists.

What are the main sources of India’s crude imports and their shares?

India imported about 88% of its crude in 2025; 45% came from the Middle East, 35% from Russia, and 6% from the United States.

How could a sustained rise in crude oil affect India's external balance and fiscal outlook?

A persistent USD 10 per barrel rise could widen the current account deficit by about 30 basis points of GDP; a full excise rollback could erase around USD 36 billion in annual revenue and widen the deficit by about 80 basis points.