Oil Under-recovery
Current under-recovery levels of oil marketing cos unsustainable, says ICRA
This story was originally published at 19:13 IST on 25 May 2026
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NEW DELHI - The under-recoveries of oil marketing companies remain unsustainable even after the multiple rounds of hikes in petrol and diesel prices in recent weeks, according to ICRA Ltd. The state-run oil companies have hiked petrol prices by INR 7.35 per litre and diesel by INR 7.53 per litre over the last two weeks, as energy supply remains disrupted due to the ongoing war in West Asia.
"Despite the latest hike in retail prices of auto fuels, oil marketing companies' under-recoveries remain stubbornly high due to increasing losses in domestic LPG sales and a high premium to the crude marker," said Prashant Vasisht, the senior vice president and co-group head of corporate ratings at ICRA.
"At crude price of $120-125 per barrel and considering past 10-year average crack spreads of auto fuels, oil marketing companies are incurring a loss of about Rs 700-800 crore (INR 7 billion- INR 8 billion) daily on the sale of auto fuels and domestic LPG, even after factoring the fuel price hike," Vasisht said.
Crude oil prices have risen by over 50% since the war between the US and Iran broke out in the Persian Gulf on Feb. 28. Oil prices remain on edge as the Strait of Hormuz, a crucial chokepoint through which 20% of the world's oil flowed before the war, remains closed.
Before these recent hikes, the Centre had not raised petrol and diesel prices in the last four years. The prices were cut once before the Lok Sabha elections in 2024.
The losses of state-owned oil marketing companies have narrowed to "slightly less" than INR 6 billion per day following the staggered hikes in prices of petrol and diesel from around INR 10 billion per day, Sujata Sharma, additional secretary in the Ministry of Petroleum and Natural Gas, said Monday. End
Reported by Anand JC
Edited by Saji George Titus
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