India is currently at a turning point in its economic journey, where the stability of the energy sector no longer depends solely on crude oil prices but is increasingly being shaped by efficient cost management and strategic pricing. In recent years, India has taken several measures to keep retail fuel prices stable, helping reduce the inflationary burden on consumers.
Let us understand in detail the methods adopted by Indian OMCs to manage rising fuel costs and assess whether this theme can evolve into a meaningful investment opportunity.
What’s Happening?
Government-owned Oil Marketing Companies (OMCs) in India have kept retail petrol and diesel prices unchanged despite rising crude oil prices. To ease this burden, OMCs have started offering discounts on Refinery Transfer Price (RTP). This step, effective from 16 March 2026, marks the first such intervention in the deregulated fuel pricing system.
International crude oil prices have surged from $70 per barrel to over $100 per barrel, largely due to conflicts in the Middle East. In response, OMCs have introduced discounts of up to Rs 60 per litre on the import parity cost. In the second fortnight of March 2026, a discount of Rs 22,342 per kilolitre (Rs 22.34 per litre) was applied to diesel, reducing the RTP from Rs 85,349 per kilolitre to Rs 63,007 per kilolitre. In the first fortnight of April 2026, this discount increased to Rs 60,239 per kilolitre, bringing the RTP down from Rs 1,46,243 per kilolitre to Rs 86,004 per kilolitre.
A discount of Rs 50,564 per kilolitre was applied to ATF, reducing the RTP from Rs 1,27,486 per kilolitre to Rs 76,923 per kilolitre. For kerosene, a discount of Rs 46,311 per kilolitre brought the RTP down from Rs 1,23,845 per kilolitre to Rs 77,534 per kilolitre. As of 1 April 2026, under-recoveries stood at Rs 24.40 per litre on petrol and Rs 104.99 per litre on diesel.
OMC’s Discount Strategy and RTP Adjustment
OMCs have decided to set RTP below the import parity cost, effectively requiring refiners to absorb a portion of the increased crude oil costs. OMCs operate around 90% of the country’s more than 1,00,000 petrol pumps. Fuel prices have remained unchanged since April 2022, and unlike LPG, there is no government compensation for auto fuels.
This approach allows OMCs to distribute losses across the refining ecosystem while continuing to shield consumers from price volatility. Integrated OMCs such as Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum are better positioned to balance their refining and marketing operations.
Increasing Pressure on Standalone Refiners
The impact of these discounts is more pronounced for standalone refiners, as they rely heavily on RTP and have limited retail networks. Mangalore Refinery and Petrochemicals Limited (MRPL), Chennai Petroleum Corporation Limited (CPCL), and HPCL-Mittal Energy Limited (HMEL) are facing the most pressure.
Private refiners such as Nayara Energy and Reliance Industries could also be affected if similar discounts are extended to them. Standalone refiners are witnessing a sharp decline in margins, as they are unable to fully pass on the higher crude costs through RTP. This could potentially distort the pricing signals of a deregulated market.
What Does This Mean for Investors?
This development serves as an important signal for investors in the refining sector. While integrated OMCs can manage losses through internal adjustments, standalone refiners are likely to face increasing margin pressure. Investors should closely track companies with strong retail networks or integrated business models.
While this strategy may support consumer sentiment in the short term by keeping fuel prices stable, it could weigh on the profitability of refiners over the longer term. Investors may consider prioritising companies with stronger margin resilience and diversified operations.
What’s Next?
The Ministry of Petroleum and Natural Gas stated on 1 April that global oil prices have risen by up to 100% over the past month. As a result, public sector OMCs are facing under-recoveries of Rs 24.40 per litre on petrol and Rs 104.99 per litre on diesel.
To provide relief, the government has reduced the Special Additional Excise Duty by Rs 10 per litre on both petrol and diesel. Consequently, the duty on diesel has been reduced to zero, while on petrol it now stands at Rs 3 per litre. However, this relief will not be passed on to consumers, and retail fuel prices will remain unchanged. The move is aimed at easing the financial pressure on OMCs.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
