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Informist, Saturday, May 16, 2026

 

By Anshul Choudhary

 

MUMBAI - State-owned oil marketing companies could see years of profits getting wiped out in a single quarter due to the surge in crude oil prices caused by the US-Iran war. These companies may report combined under-recoveries of INR 1.72 trillion for the June quarter from their petrol and diesel businesses alone, an Informist calculation showed.

 

For oil marking companies, an under-recovery occurs when the selling price of a petroleum product is lower than the cost of producing it. There is limited official data available for under-recoveries of oil marketing companies, which mainly includes Indian Oil Corp. Ltd., Bharat Petroleum Corp. Ltd., and Hindustan Petroleum Corp. Ltd.

 

The petroleum ministry had in April said the under-recovery for petrol sales was INR 24.40 per litre as on Apr. 1 and for diesel it was INR 104.99 per litre. Oil minister Hardeep Singh Puri Tuesday said the three state-run oil marketing companies were incurring losses of INR 14 per litre of petrol sold and INR 42 per litre of diesel sold. The government Friday hiked petrol and diesel prices by around INR 3 per litre and this will help cut under-recoveries for the rest of the June quarter. This analysis is based on these official numbers to extrapolate the losses oil marketing companies are likely to report in the June quarter.

 

For this analysis, these companies' sales volumes for the June quarter were calculated based on the historical growth trend. Indian Oil Corp. reported a 6% rise in its petrol sales volumes and 1% decline in diesel sales during the financial year 2024-25 (Apr-Mar). These are the rates used to calculate volumes Indian Oil may sell in a month during FY27. The company will sell an estimated 1.47 million tonne, or 1.95 billion litres, of petrol each month and nearly 3 million tonne, or 3.6 billion litres, of diesel each month in the June quarter.

 

Based on the estimated sales volume and under-recoveries of INR 24.40 per litre of petrol sold and of INR 104.99 per litre of diesel sold, the total under-recoveries for Indian Oil total INR 420 billion for April. Similarly, the under-recoveries for the first half of May totals INR 88 billion based on an under-recovery of INR 14 and INR 42 per litre of petrol and diesel sold, respectively. For the rest of the June quarter, the under-recoveries would be nearly INR 240 billion based an under-recovery of INR 11 and INR 39 per litre of petrol and diesel sold, respectively, after taking into account the INR 3 per litre price hike effected Friday for both these fuels.

 

With this, the total under-recovery for Indian Oil for the June quarter totals over INR 748 billion. This is six times the INR 121 billion net profit the company had reported for the December quarter. It is also almost two times the INR 378 billion net profit the company is expected to post for FY26. Indian Oil's net profit for the last three years, including the actual profits for FY24 and FY25 and the estimated profit for FY26, totals only INR 904 billion.

 

A point to note here is that these under-recoveries are only on account of petrol and diesel sales, which account for 70% of the total volumes of the company. The under-recoveries on sales of gas will also be significant and will likely result in the company reporting an even larger loss for the June quarter. These under-recoveries on sales of gas cannot be estimated as there is no data available publicly on the extent of under-recovery on per unit of gas sold. Of course, the government has raised prices of gas for commercial users in May but the price increase did not cover the full under-recoveries. Also, the government has not raised prices for residential users. Indian Oil will detail its March quarter earnings Monday.

 

The picture is the same for other oil marketing companies as well. HPCL's estimated under-recovery for the June quarter is over INR 477 billion. This is almost 10 times the INR 49 billion net profit the company reported for the March quarter and almost three times INR 172 billion net profit it reported for the entire FY26.

 

Bharat Petroleum's under-recovery for the June quarter is estimated at INR 493 billion. This is 11 times the INR 43 billion net profit it is expected to report for the March quarter. It is also almost twice the INR-249-billion net profit the company is expected to report for FY26.

 

The combined under recovery for the three oil marketing companies totals INR 1.72 trillion for the petrol and diesel business. Oil minister Puri has said oil companies' under-recoveries are expected to surge to INR 2 trillion for the June quarter. This would include the under-recoveries on sales of gas and other products. Puri has also said oil companies' losses could be over INR 1 trillion for the June quarter.

 

While the government has finally raised prices of petrol and diesel, the increase is paltry compared with the increase required to allow the oil companies to recover their costs. Shares of oil marketing companies have fallen on concern these companies will make huge losses in the coming quarters. Till Friday, shares of these companies have fallen 16-28% since the US-Iran war started February-end.

 

Shares of Indian Oil has fallen nearly 28% since the war started and the stock Friday closed at INR 134.48 per share on the National Stock Exchange. Shares of Bharat Petroleum has fallen more than 26% since the war started and they closed at INR 284.45. Shares of Hindustan Petroleum is down over 16% during the period and it closed at INR 366.40.  End

 

US$1 = INR 95.965

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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