India’s Oil Marketing Companies (OMCs) are facing estimated under-recoveries of nearly ₹30,000 crore every month as the ongoing West Asia crisis disrupts crude oil and gas supplies through the strategically important Strait of Hormuz. The disruption has sharply increased international crude oil, LNG and LPG prices, putting significant financial pressure on state-run fuel retailers such as Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL).
Government Cuts Excise Duty to Protect Consumers
According to Sujata Sharma, Joint Secretary in the petroleum ministry, the government has attempted to shield consumers from rising global energy prices by reducing excise duty on petrol and diesel by ₹10 per litre in late March. However, the tax reduction has resulted in revenue losses of nearly ₹14,000 crore per month for the government.
“Our oil marketing companies are also facing losses, but the government has tried to ensure that there is no increase in consumer prices, and therefore excise duty has also been reduced,” Sharma said. Despite these measures, OMCs continue to absorb heavy losses on petrol, diesel and LPG sales.
Fuel Losses Exclude Aviation Turbine Fuel Impact
The estimated ₹30,000 crore monthly under-recoveries do not include losses from Aviation Turbine Fuel (ATF), where prices have surged significantly following escalating tensions involving Iran, Israel and the United States. To limit the burden on airlines, the government has capped monthly ATF price increases by OMCs at 25 per cent.
Strait of Hormuz Disruption Hits India’s Energy Security
India remains highly vulnerable to disruptions in the Strait of Hormuz because the country imports nearly 88 per cent of its crude oil requirements. Before the conflict intensified, nearly 90 per cent of India’s LPG imports from West Asia and about 50 per cent of natural gas imports passed through the Strait of Hormuz. As cargo movement slows, supplies of crude oil, LNG and LPG have tightened, causing global energy prices to spike sharply. According to the Petroleum Ministry, crude oil prices have risen from nearly $70 per barrel two months ago to around $120 per barrel. Meanwhile, LPG prices linked to the Saudi Contract Price (CP) benchmark have increased to nearly $780 per tonne.
OMCs Absorb Heavy Daily Losses
Although global fuel prices have surged, retail petrol and diesel prices in India have remained unchanged since February 28. As a result, OMCs incurred estimated under-recoveries of around ₹18 per litre on petrol and ₹25 per litre on diesel during April. This translated into average daily losses of ₹600–700 crore. However, the government has approved selective increases in LPG prices. Domestic LPG cylinder prices have risen by ₹60, while commercial LPG cylinder rates have increased by more than ₹1,000 per cylinder.
Higher Freight and Insurance Costs Add Pressure
Apart from higher crude prices, OMCs are also dealing with rising logistics expenses. As reported by msn.com, emergency sourcing of crude oil, longer shipping routes to avoid conflict zones and sharply higher marine insurance premiums have collectively increased operational costs for Indian energy companies. The geopolitical uncertainty has also disrupted maritime trade in the region.
