India’s fuel retailers are facing significant challenges. Despite calls for a price hike to manage rising global crude costs, the government is focused on keeping the economy steady. Adjusting retail prices won’t happen lightly; it’s about strategy, not just covering costs.
Currently, Brent crude oil hovers around $109 per barrel, impacted by geopolitical tensions and supply disruptions, especially in the Strait of Hormuz. This situation has hit state-run Oil Marketing Companies (OMCs) hard. According to ICRA, these companies are currently seeing losses of approximately Rs 14 per litre on petrol and Rs 18 on diesel. For every $1 increase in crude prices, these losses grow by about 60 paise per litre if retail prices remain the same. The struggles extend to Liquefied Petroleum Gas (LPG) as well, with projections of Rs 80,000 crore in losses for FY27 if trends continue.
Even with these losses, India’s major OMCs—Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL)—still look like value stocks. Their low Price-to-Earnings (P/E) ratios, around 5.86x for IOCL, 5.85x for BPCL, and 5.37x for HPCL, indicate that investors are getting good earnings for what they pay. Historically, these companies have been strong, with expectations of improved operating profits for FY26. Plus, the government approved a ₹300 billion support package in Q2 FY26 to help with LPG losses, providing a bit of a cushion.
Retail fuel prices have remained unchanged since early April 2022. This prolonged freeze has shielded consumers but caused serious losses for OMCs. A Rs 10 excise duty cut in March 2026 helped somewhat but cost the government about Rs 1.7 lakh crore annually. The situation is complicated by ongoing turbulence in the Strait of Hormuz, which is crucial for global energy transport. Unlike past price shocks, retail prices haven’t adjusted upward significantly this time.
The government is wary of raising fuel prices because of its broader economic goals. With inflation at 3.4% in March 2026, experts warn that if crude averages $120 per barrel in FY27, inflation could spike to 6%. Such increases could push up transport and food costs, threatening overall economic growth that is already projected to slow down.
Some government officials question claims of ‘huge losses,’ arguing that these figures may not reflect actual operational difficulties. This indicates a divide between industry and government views, making immediate price increases unlikely. Analysts from Kotak Institutional Equities have even reduced their forecasts for BPCL, HPCL, and IOCL and suggested that investors might want to sell these stocks due to mounting oil prices.
While OMCs are advocating for higher prices, the government prioritizes stability over immediate adjustments. Officials have denied plans for quick price hikes, labeling rumors as ‘fake news.’ However, there are whispers of potential increases of Rs 4-5 per litre for petrol and diesel, and Rs 40-50 for domestic LPG. Any changes will largely depend on global oil price movements and the government’s strategy to balance consumer affordability with the viability of OMCs.
As the situation develops, both OMCs and the government face a daunting task. They must navigate rising costs while trying to keep the economy stable and protect consumers.
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Petrol price hike, Diesel price hike, India fuel prices, Crude oil prices, OMC losses, Government fuel policy, Inflation India, Petroleum Ministry, Brent crude, Fuel under-recoveries
