Indian Oil Firms Lose Rs 530 Crore Daily
Oil Marketing Companies (OMCs) in India are facing significant financial strain, with daily losses estimated at Rs 530 crore, according to rating agency ICRA. This situation arises from the recent surge in crude oil prices, which have climbed to $117.4 per barrel as of September 21, 2026, up from an average of $66 per barrel in 2025-26.
Geopolitical Tensions Drive Crude Price Spike
The sharp increase in crude oil prices is attributed to escalating geopolitical tensions and supply disruptions in West Asia. Key factors include the US-Iran conflict, the shutdown of Saudi Arabia’s East-West pipeline, and heightened Houthi activities in the Red Sea. These events have disrupted oil supply routes, leading to a spike in prices.
Prashant Vasisht, Senior Vice-President and Co-Group Head of Corporate Sector Ratings at ICRA, noted, “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.”
Impact on OMCs and Consumers
With domestic retail prices remaining unchanged, OMCs are experiencing negative marketing margins of Rs 8 per litre on petrol and Rs 9 per litre on diesel. Additionally, LPG under-recoveries stood at around Rs 300 per cylinder in September 2026. The cumulative negative LPG buffer has risen sharply to Rs 61,940 crore as of June 30, 2026.
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The financial pressure on OMCs is further exacerbated by the need for increased short-term borrowings to meet working capital requirements. The impact on their earnings in 2026-27 will depend on several factors, including crude prices, product cracks, retail price revisions, and government support for LPG under-recoveries.
Refining Margins and Export Levies
Singapore gross refining margins (GRM) have remained above $10 per barrel since the onset of the West Asia crisis, supported by refinery disruptions, inventory drawdowns, and outages in West Asian refining capacity. Additional supply shortages due to damage to Russian refineries have further tightened product markets, sustaining raised refining margins.
To address the rising product prices, the government introduced export levies in the form of the Special Additional Excise Duty (SAED) on diesel and aviation turbine fuel (ATF) from March 27, 2026. These levies were later extended to petrol. For domestic supplies, the SAED is adjusted in the refinery transfer price, reducing the effective product cost for the marketing divisions of OMCs.
