Industry Odisha Bureau, Sep 23: With pump prices frozen, a crude price surge has pushed fuel margins negative. ICRA estimates the daily hit to oil firms at Rs 530 crore.
Every litre of petrol and diesel sold now costs India’s state-run oil firms money. Rating agency ICRA estimates the combined drain at about Rs 530 crore a day. The squeeze falls on Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum. Global crude prices have surged, while domestic fuel prices have not budged.
Unchanged pump prices push petrol, diesel margins negative
ICRA pegs the marketing margin on petrol at negative Rs 8 per litre. Diesel fares worse, at an estimated negative Rs 9 per litre. Put simply, retail realisations no longer cover the cost of the fuel. Each additional litre sold therefore deepens the shortfall.
This is not the full earnings picture, however. IOC, BPCL and HPCL also run substantial refining businesses. Group profitability depends on how both segments perform together.
Indian crude basket climbs to $117.4
India’s imported crude basket touched $117.4 per barrel on September 21, 2026. Through 2025-26, it averaged around $66 per barrel. That steep rise has sharply inflated input costs for oil marketing companies.
ICRA traced the spike to escalating tensions and supply disruptions in West Asia. It cited renewed US-Iran conflict and the shutdown of Saudi Arabia’s East-West pipeline. Heightened Houthi activity has further disrupted Red Sea supply routes.
Prashant Vasisht, senior vice-president at ICRA, said these disruptions had triggered the spike. He is also co-group head of corporate sector ratings.
Refining margins provide a partial offset
The refining side offers some relief. Singapore gross refining margins have stayed above $10 per barrel, ICRA said. Refinery outages, supply disruptions and inventory drawdowns have supported them.
The distinction between the two margins matters. Refining margins measure earnings from turning crude into finished products. Marketing margins measure what retail prices recover against those product costs. Strong refining gains can cushion integrated oil companies. They cannot, by themselves, erase negative petrol and diesel margins.
LPG under-recoveries widen the burden
ICRA estimated domestic LPG under-recoveries at around Rs 300 per cylinder in September 2026. The figure had been near Rs 500 per cylinder in the first quarter of 2026-27. International LPG prices climbed after West Asian supply disruptions.
The cumulative negative LPG buffer reached Rs 61,940 crore as of June 30. Any government support for these losses could influence OMC earnings.
Costlier crude lifts working capital and borrowing
Higher crude and product prices lock up more cash in daily operations. ICRA expects working capital requirements to rise as a result. That would push up short-term borrowing needs, the agency said. Profitability and cash flows would both come under pressure, it added.
Export levies add another layer to refinery economics. They were introduced on diesel and ATF, then extended to petrol. From September 16, diesel’s Special Additional Excise Duty stood at Rs 20 a litre. The levy on ATF stood at Rs 15 a litre.
Key variables for FY27 OMC earnings
ICRA said 2026-27 earnings will depend on several moving parts. These include crude prices and product cracks. Retail revisions to petrol and diesel prices will also count. So will government support for LPG under-recoveries.
For now, frozen pump prices and $117 crude keep oil firms under strain.
