Oil Companies Bleed Rs 14-18/Litre on Fuel Sales

Oil marketing companies are currently incurring substantial losses on petrol and diesel sales, with losses estimated at Rs 14 per litre for petrol and Rs 18 per litre for diesel. These losses stem from elevated global crude oil prices that have surpassed capped retail fuel rates, thereby squeezing profit margins. The ongoing West Asia crisis has exacerbated the situation, leading to supply disruptions.

Beyond fuel, companies are facing significant under-recoveries on cooking gas (LPG), projected to reach Rs 80,000 crore in the current fiscal. The fertiliser subsidy burden is also expected to rise considerably, potentially reaching Rs 2.05 to 2.25 lakh crore. These escalating energy and raw material costs are pressuring profitability across oil refining, fertilisers, chemicals, and city gas distribution sectors.

Rating agency Icra notes that supply disruptions in key shipping routes have tightened the availability of fuels, fertilisers, and chemicals, driving up prices. While the crude oil refining segment's outlook remains stable, the fuel retailing, fertiliser, and chemical sectors face a negative outlook due to these cost pressures and limited ability to pass on increased expenses to consumers. The situation is expected to persist until geopolitical tensions ease and global supply chains normalize.