OMCs stare at big losses despite recent price hikes

ET Intelligence Group: Oil Marketing Companies (OMCs) have raised petrol and diesel prices four times since May 15, but the spate of increases may not be over yet. Despite a cumulative rise of nearly ₹7.5 per litre, the increase is insufficient to offset the current per litre loss of ₹12 and ₹21 on petrol and diesel respectively. According to industry estimates, OMCs are likely to incur losses of ₹74,000-84,000 crore on petrol and diesel sales in the June 2026 quarter. An under-recovery is the loss an oil company incurs when it sells fuels for less than what it costs to buy and refine crude to produce them.

“OMCs may incur losses of ₹74,486 crore in the June quarter based on prevailing petroleum product prices and auto fuel prices at retail outlets,” Nilesh Ghuge, Institutional Research, HDFC Securities, told ET. Given the losses incurred by OMCs currently, He expects OMCs to raise fuel prices further to avoid losses.

Higher under-recoveries will result in a sharp erosion in quarterly profitability and book value of the three state-run OMCs including Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation. Including LPG (liquefied petroleum gas), gross under-recoveries are likely to be ₹1.1-1.2 lakh crore in the June quarter in the prevailing pricing environment, according to Equirus Securities. LPG under-recoveries are estimated at ₹32,500 crore due to elevated Saudi contract prices and unchanged retail LPG prices.

“If Brent crude sustains above $100 per barrel, an additional retail fuel price increase of ₹5-6 per litre in petrol and diesel would be required to avoid EBITDA pressure,” said Maulik Patel, head of research, Equirus Securities. He expects under recoveries of OMCs to reach ₹84,300 crore in June 2026 quarter.

Besides price increases since May 15, the government also lowered excise duty by ₹10 per litre on auto fuels in March. On a positive note, OMCs enter the current tough phase exhibiting balance sheet strength.