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According to ICICI Securities, state-run oil marketing companies lost an estimated ₹18.9 per liter of diesel and ₹6 per liter of petrol between April and June. The losses came despite domestic pump prices remaining largely unchanged, highlighting how fuel pricing works and why crude oil prices alone do not determine OMC’s profitability.
According to the brokerage, OMCs saw margins of ₹8.2/litre on diesel and ₹10.3/litre on petrol in the corresponding quarter last year. However, the increase in international prices of crude oil and refined fuels in the last quarter was not fully reflected in retail prices, which pushed marketing margins into negative territory.
How are gasoline and diesel priced?
The price paid by consumers at gas stations consists of several components. At the refinery gate, gasoline and diesel are priced largely in line with the international prices of refined fuels. Oil companies then add freight and logistics costs, marketing and distribution costs, dealer commissions and applicable taxes before arriving at the final price at the pump.
| Component | What it contains |
| ——————– | ——————————————- |
| Refinery price | Related to international refined fuel prices |
| Freight and logistics | Shipping and delivery costs |
| Dealer Commission | Commission paid to fuel station dealers |
| Taxes | Central Excise Duty and State Value Added Tax |
| Retail Margin | OMC yield |
When international fuel prices rise, but pump prices are not revised proportionately, the retail margins of OMCs shrink. On the other hand, if world market prices fall while retail prices remain the same, companies earn higher margins.
Why are losses increasing?
ICICI Securities attributed the latest losses between April and June to rising fuel prices and relatively stable domestic pump prices.
Petroleum and Natural Gas Minister Hardeep Singh Puri recently said that OMCs incurred a loss of around ₹ 75,000 crore during the quarter by selling petrol, diesel, LPG and jet turbine fuel below market rates.
How is a liter of petrol or diesel priced
| Component | What does that mean |
|---|---|
| Refinery price | Based on international prices of refined gasoline and diesel |
| Freight and logistics | Fuel transportation costs to warehouses and retail outlets |
| Marketing and distribution | OMC operating expenses |
| Dealer commission | Commission paid to petrol pump dealers |
| Taxes | Central Excise Duty and State Value Added Tax |
| Retail Margin | Profit or loss earned by OMC after selling the fuel |
The current losses mark a sharp turnaround from the strong retail margins of the past two fiscal years. According to ICICI Securities, petrol margins peaked at ₹12/litre in 3Q25, while diesel margins stood at ₹8.2/litre in 1Q26.
OMC Retail Margins (₹ per liter)
| Season | Diesel | Petrol |
|---|---|---|
| April-June 2026 | -18.9 | -6.0 |
| April-June 2025 | 8.2 | 10.3 |
| June quarter FY25 | 2.5 | 4.4 |
| Peak Margin (last 2 FYs) | 8.2 (Q1 FY26) | 12.0 (Q3 FY25) |
Source: ICICI Securities
Why crude oil is not the only factor
The general assumption is that petrol and diesel prices should fall immediately whenever the price of crude oil falls. In reality, fuel prices in India are affected not only by crude oil but also by international prices of refined petroleum products.
Industry officials say OMC methods compare petrol and diesel to global refined fuel prices in markets such as Singapore and Dubai. Freight costs, insurance premiums and exchange rate changes are also taken into account in the pricing.
The oil minister has also emphasized that the fuel sold today is made from crude oil purchased weeks earlier, which means that the current retail trade often reflects previous acquisition costs rather than prevailing crude oil prices.
Why analysts disagree
The method used in the calculation of marketing margins has led to different estimates. While ICICI Securities reported losses in the April-June quarter, some analysts say margins have since improved as Brent crude prices have fallen to around $72-73 a barrel.
The different estimates reflect variations in assumptions regarding inventory costs, international refined fuel prices and the timing of crude oil purchases. However, it is clear to consumers that OMC’s profitability depends on global fuel prices, taxes, exchange rates and government decisions on pump prices – not just crude oil prices.
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