State-run oil marketing companies (OMCs) in India incurred substantial losses on fuel sales during the first quarter of fiscal year 2026. According to an ICICI Securities report, these companies lost an estimated ₹18.9 on every litre of diesel and ₹6 on every litre of petrol sold between April and June 2026.
These significant Indian fuel losses occurred despite domestic pump prices remaining largely stable. The core issue, experts explain, is a disconnect between rising international prices for refined petroleum products and unchanged retail prices at home.
Understanding Indian Fuel Pricing Beyond Crude
A common misconception is that domestic fuel prices directly mirror global crude oil prices. However, the reality is more complex. Indian fuel prices are primarily benchmarked against international prices of refined petroleum products, not just crude oil. Factors such as freight costs, insurance charges, and exchange rate movements also play a crucial role in the final pricing.
Petroleum and Natural Gas Minister Hardeep Singh Puri recently stated that OMCs collectively faced losses of approximately ₹75,000 crore during the quarter, selling petrol, diesel, LPG, and aviation turbine fuel below market rates.
Components of Your Fuel Bill
The price consumers pay at the pump is a composite of several elements:
- Refinery Price: This component is linked to international refined fuel prices.
- Freight & Logistics: Costs associated with transporting fuel to depots and retail outlets.
- Marketing & Distribution: Operational expenses incurred by OMCs.
- Dealer Commission: The commission paid to fuel station owners.
- Taxes: Includes central excise duty and state-level Value Added Tax (VAT).
- Retail Margin: The profit or loss earned by OMCs after all other costs.
When international refined fuel prices increase, but domestic pump prices are not adjusted proportionally, the OMCs' retail margins shrink, often turning negative, leading to losses.
A Reversal from Past Profits
The current period of Indian fuel losses marks a sharp reversal from the strong retail margins OMCs enjoyed over the previous two financial years. For instance, petrol margins peaked at ₹12 per litre in the third quarter of FY25, while diesel margins reached ₹8.2 per litre in the first quarter of FY26, according to ICICI Securities data.
Industry officials also highlight that the fuel sold today is often produced from crude purchased weeks earlier. This means current retail economics frequently reflect earlier procurement costs rather than the immediate prevailing crude prices, further complicating the pricing structure.
Differing Analyst Views
While ICICI Securities reported significant losses for the April-June 2026 quarter, some analysts offer differing perspectives. They argue that margins may have improved since then, particularly as Brent crude prices eased to around $72-73 per barrel. These variations in assessment often stem from differing assumptions regarding inventory costs, international refined fuel prices, and the timing of crude purchases.
Ultimately, for consumers, the core takeaway remains consistent: the profitability of Indian OMCs depends on a complex interplay of global refined fuel prices, government tax policies, exchange rates, and administrative decisions on retail pump prices, rather than crude oil prices alone.