Citi believes the Indian government has cleverly used the recent steep fall in crude oil prices to partially offset the losses incurred by oil marketing companies (OMCs) on subsidised LPG sales during FY25.
According to Citi, three key policy announcements from the government reflect this approach:
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₹2/litre excise duty hike on petrol and diesel—without any increase in retail fuel prices. This reduces the exceptionally high marketing margins enjoyed by OMCs but keeps them comfortably profitable.
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The additional revenue of ₹330 billion (annualised) from the excise hike is expected to offset the ₹413 billion in LPG losses faced by OMCs in FY25.
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An increase of ₹50/cylinder in LPG prices, which Citi estimates will reduce average LPG losses by 23% (from ₹210–220/cylinder).
The brokerage believes this is a pragmatic way to manage fiscal balance while supporting the financial health of OMCs like IOC, BPCL, and HPCL. It adds that while no formal subsidy has been announced, the effective support through indirect means bodes well for the sector’s earnings outlook.
Disclaimer: The above views are of the broker’s and not the author or the publication’s. Please make any and every investment decision after consulting your financial advisor.
