Oil marketing companies (OMCs) are estimated to be losing around Rs 530 crore a day as a sharp rise in crude oil prices has widened their losses on petrol, diesel and domestic LPG, rating agency ICRA said on Wednesday.
ICRA estimated the marketing margins of OMCs at negative Rs 8 per litre on petrol and negative Rs 9 per litre on diesel, while under-recoveries on domestic LPG stood at around Rs 300 per cylinder in September 2026. The losses have widened as domestic retail prices of petrol, diesel and LPG have remained unchanged despite the recent surge in international crude oil and LPG prices.
“The escalation of the West Asian conflict and disruptions to key oil supply routes have led to a spike in crude prices in recent weeks, resulting in sizeable marketing losses and LPG under-recoveries for oil marketing companies (OMCs). With domestic retail prices remaining unchanged so far, the marketing margins of OMCs were estimated at negative Rs. 8/litre on petrol and negative Rs. 9/litre on diesel, while domestic LPG under-recoveries stood at around Rs. 300 per cylinder in September 2026. At these levels, the daily loss to the OMCs is estimated at Rs. 530 crore,” said Prashant Vasisht, Senior Vice-President and Co-Group Head, Corporate Sector Ratings, ICRA.
Crude oil prices have risen sharply in recent weeks amid escalating geopolitical tensions and supply disruptions in West Asia. The Indian crude basket rose to $117.4 per barrel on September 21, compared with an average of around $66 per barrel in 2025-26.
The surge has been driven by the renewed US-Iran conflict, the shutdown of Saudi Arabia's East-West pipeline and heightened Houthi activities in the Red Sea.
“Elevated crude prices and unchanged domestic fuel prices would put pressure on profitability and cash flows of OMCs. The same would also elevate their short-term borrowings for increased working capital requirements. The impact on OMCs’ earnings in 2026-27 will depend on crude prices, product cracks, retail price revisions and government support for LPG under-recoveries,” Vasisht added.
The cumulative negative LPG buffer increased sharply to Rs 61,940 crore as of June 30, 2026, as the rise in international LPG prices following supply disruptions in West Asia was not fully passed on to consumers.
The estimated loss per domestic LPG cylinder stood at around Rs 500 in the first quarter of 2026-27 and remained at around Rs 300 in September. ICRA said LPG under-recoveries could rise further if international prices remain elevated without a corresponding increase in domestic selling prices or additional government compensation.
Meanwhile, Singapore gross refining margins have remained above $10 per barrel since the beginning of the West Asia crisis, supported by refinery and product supply disruptions, inventory drawdowns and outages across West Asian refining capacity.
Additional supply shortages caused by damage to Russian refineries have further tightened product markets and supported refining margins. The government introduced Special Additional Excise Duty (SAED) on diesel and aviation turbine fuel (ATF) from March 27, 2026, and subsequently extended it to petrol as product prices increased.
For domestic supplies, SAED is adjusted in the refinery transfer price, reducing the effective product cost for the marketing divisions of OMCs. The SAED has remained at Rs 20 per litre on diesel and Rs 15 per litre on ATF since September 16, reflecting the strong cracks for these fuels.
