State-run oil companies are losing money on every litre of diesel and petrol sold during the April-June quarter. This pressure on profit margins follows a sharp rise in global fuel prices that has not been passed on to consumers at the pump.
What Happened
State-run oil marketing companies (OMCs) have seen their profit margins turn negative during the first quarter of the current fiscal year. According to industry estimates, these companies are currently losing approximately ₹18.9 on every litre of diesel and ₹6 on every litre of petrol sold. This shift comes as domestic retail fuel prices remained unchanged despite a significant increase in international crude oil and refined fuel costs during the April-June period.
The Profit Margin Squeeze
The current losses represent a major reversal from the profitability seen in the same period a year ago. During that time, OMCs were earning a profit of ₹8.2 per litre on diesel and ₹10.3 per litre on petrol. The inability to adjust retail pump prices in line with global benchmarks has directly impacted the bottom line. Petroleum Minister Hardeep Singh Puri recently confirmed that OMCs have incurred combined losses of roughly ₹75,000 crore for the quarter, covering the sale of petrol, diesel, LPG, and jet fuel below their actual market costs.
Why Retail Pricing Is Volatile
In India, fuel prices are theoretically linked to international benchmarks at the refinery gate, with additional costs for freight, distribution, and dealer commissions factored in. However, OMCs have frequently kept domestic retail prices stable even when global costs rose. This practice, which became more common following the spike in global oil prices in 2022, creates a buffer for the government and consumers when oil prices fall but leads to significant losses for the oil companies when global costs remain elevated for long periods.
Historical Context of Margins
Retail margins for oil companies have shown high volatility in recent years. For instance, in the third quarter of the 2024-25 fiscal year, petrol margins peaked at ₹12 per litre. In the first quarter of the 2025-26 fiscal year, diesel margins reached ₹8.2 per litre. These fluctuations demonstrate that while OMCs can benefit from periods of lower international prices, they remain highly vulnerable to sustained global price surges when they are unable to pass those costs to the end user.
What Investors Should Track
The most important monitorable for investors is the trend in international crude oil prices and whether the government allows OMCs to resume regular price revisions. Investors should also watch for updates on government compensation or subsidy support, which has historically been used to offset losses during periods of extreme margin pressure. The ability of these companies to maintain their balance sheets amid such volatility will be a key indicator for their long-term financial health.