OMCs Losses Surge As Fuel Margins Shrink

State-run oil marketing companies are under pressure as rising crude oil prices and unchanged retail fuel rates squeeze their earnings. In the fourth quarter ending March 31, Indian Oil Corporation, BPCL, and HPCL saw margins shrink sharply, with diesel sales turning loss-making and petrol profits narrowing.

Brokerage estimates indicate a steep decline in overall profitability, highlighting the growing impact of global oil movements on domestic fuel retailers.

Diesel Losses Mount For Oil Marketing Companies

Indian Oil Corporation, BPCL, and HPCL recorded losses of about ₹6 per litre on diesel sold in the retail market during the fourth quarter. This marks a sharp reversal from a profit of ₹5.50 per litre in the same period last year.

Rising Input Costs Hit Diesel Margins

The increase in crude oil prices has significantly raised input costs for oil marketing companies. With retail prices remaining unchanged, these higher costs have directly translated into losses on diesel sales.

Petrol Margins Narrow Amid Crude Price Surge

Petrol margins declined steeply to ₹2.90 per litre, compared to ₹8.50 per litre a year earlier, according to ICICI Securities. The drop reflects the pressure created by surging global crude oil prices.

Iran War Drives Crude Oil Spike

The rise in crude oil prices was largely driven by geopolitical tensions linked to the Iran war in March. Despite this surge, domestic retail fuel prices remained static, reducing the profitability of petrol sales.

LPG Under-Recovery Adds To Financial Pressure

Oil marketing companies also faced a sharp increase in LPG under-recovery, which rose by ₹110 to ₹120 billion in the fourth quarter. This further strained their financial performance.

Profit Expected To Drop Sharply

ICICI Securities has projected an 82 percent year-on-year decline in the combined quarterly profit of Indian Oil Corporation, BPCL, and HPCL. The drop is attributed to higher fuel losses and rising LPG under-recovery.

Refining Margins Provide Limited Relief

Despite the pressure on retail fuel margins, gross refining margins showed resilience in the fourth quarter. Indian Oil Corporation’s refining margin is estimated at $10.10 per barrel, up from $7.90 a year earlier.

Strong Global Trends Support GRMs

BPCL’s refining margin is estimated at $12 compared to $9.20, while HPCL’s stands at $11.90 versus $8.40. These gains reflect favourable global refining trends, although they are not enough to offset losses in fuel marketing.

Conclusion

The fourth-quarter performance of oil marketing companies reflects the growing mismatch between rising crude oil prices and static retail fuel rates. While refining margins have improved, losses on diesel and shrinking petrol margins continue to weigh heavily on overall profitability.