India's public sector oil marketing companies (OMCs) are reportedly facing significant financial strain, with sources indicating a potential hike in petrol and diesel prices before May 15. This comes as global crude oil prices remain elevated due to the ongoing conflict in West Asia and disruptions to critical shipping routes like the Strait of Hormuz, through which a substantial portion of the world's oil supply passes.
Despite a global surge in fuel costs, India has largely maintained stable prices. For instance, petrol currently reaches nearly ₹295 per litre in Hong Kong, ₹240 in Singapore, and around ₹195 in the UK. In contrast, petrol prices in several Indian cities have hovered around ₹95 per litre without major revisions, even as crude prices climbed from approximately $70 to $126 per barrel.
OMCs Facing Massive Under-Recoveries
The stability in Indian fuel prices has come at a considerable cost to public sector OMCs, including Indian Oil, Bharat Petroleum, and Hindustan Petroleum. These companies are estimated to be suffering heavy under-recoveries, amounting to nearly ₹30,000 crore per month. This financial burden is intensifying pressure for a price adjustment.
India's Crisis Management Efforts
In response to the global energy shock, India implemented several measures to shield consumers and ensure supply stability. The government significantly reduced excise duty on petrol and diesel to absorb rising international prices. At the peak of the crude price surge, the government and OMCs collectively absorbed an estimated ₹24 per litre on petrol and ₹30 per litre on diesel.
Beyond fiscal interventions, India also ramped up domestic LPG production, increasing it from 36,000 tonnes per day to 54,000 tonnes per day. The country diversified its crude oil imports, expanding sourcing from 27 to 40 countries, including increased imports from Russia, the US, and West Africa. Indian refineries have reportedly been operating at over 100% capacity to maintain uninterrupted fuel availability. Furthermore, strategic petroleum reserves were strengthened, and ethanol blending in fuel rose from 1.5% to 20%, contributing to better energy security. The expansion of energy infrastructure over the past decade, including the doubling of LPG terminals since 2014, also played a crucial role in managing the crisis.
However, with the West Asia conflict showing no signs of abating and global crude prices remaining high, the sustained financial pressure on public sector oil companies makes a fuel price hike increasingly probable in the near future.