Somewhere between the political optics of stable petrol prices and the economic reality of $126-per-barrel crude oil, three of India’s most important public sector companies are quietly being hollowed out. Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation — the triumvirate that fuels India’s 1.4 billion people — are together losing approximately ₹30,000 crore every single month. That is ₹1,000 crore a day. ₹41 crore every hour. A haemorrhage so severe that Fitch Ratings has warned their financial defences have become “very brittle,” and that the longer the price freeze continues, the more the problem perpetuates and erodes the economy’s competitiveness.
This is the story of how India’s fuel price freeze — now in its fourth year — has transformed three profitable, strategically vital PSUs into entities absorbing losses that rival the annual budgets of mid-sized Indian states.
How did we get here? The four-year price freeze explained
Petrol and diesel prices in India have been frozen since April 2022 — nearly four years without a single revision, even as the global crude oil landscape transformed beyond recognition. Retail petrol and diesel prices in India have been frozen since April 2022, nearly four years, even as Brent crude has crossed $108 per barrel and is hovering well above Fitch’s own “adverse scenario” threshold of $100 per barrel.
The decision to hold prices was initially defensible. In early 2022, India was emerging from the pandemic, inflation was running hot globally, and state elections in Uttar Pradesh and other large states made a fuel price hike politically unthinkable. The government cut excise duties sharply in May 2022 to create fiscal headroom and asked OMCs to absorb the remainder. The implicit promise was that relief would come when crude prices normalised.
Crude prices did moderate through 2023 and into 2024, giving the OMCs a period of recovery. But the Middle East war changed everything. The ongoing conflict in West Asia and disruptions around the Strait of Hormuz have pushed global crude oil prices sharply higher, with crude rising from nearly $70 per barrel to around $126 per barrel, while petrol and diesel prices in India have remained largely unchanged.
The result is an under-recovery — the gap between what it costs to produce and supply fuel and what consumers pay at the pump — that has now reached levels not seen since the worst years of the UPA subsidy era.
The numbers: How bad is ₹30,000 crore a month?
OMC under-recoveries have swelled to ₹30,000 crore per month on the sale of petrol, diesel, and LPG combined. To understand what that means in human terms, consider some comparisons. India’s entire annual budget for the Pradhan Mantri Awas Yojana housing scheme is approximately ₹30,000 crore — the OMCs are losing that amount every single month. The combined annual profit of all three OMCs in their best recent year — FY24, when crude was lower — was approximately ₹60,000-70,000 crore. At current loss rates, they are wiping out an entire year of peak profitability every two months.
State-run oil marketing companies are currently losing approximately ₹18 per litre on petrol and ₹35 per litre on diesel, according to market estimates. Union Petroleum Minister Hardeep Singh Puri publicly acknowledged in March 2026 that OMCs were losing around ₹24 a litre on petrol and ₹30 a litre on diesel. The discrepancy between the two figures reflects the rapidly worsening situation as crude climbed further above $120 per barrel. The government has earlier said that OMCs are incurring losses of around ₹20 per litre on petrol and nearly ₹100 per litre on diesel in its most recent official acknowledgement — a figure that, if accurate, would imply total losses significantly exceeding even the ₹30,000 crore monthly estimate.
A company-by-company breakdown of the damage
Indian Oil Corporation is India’s largest company by revenue — a Fortune Global 500 entity that refines more oil than any other Indian company, operates the country’s largest pipeline network, and runs over 35,000 petrol stations. It is the backbone of India’s downstream energy infrastructure. PL Capital has maintained an ‘Accumulate’ rating on IOC with a revised target price of ₹163, while MOFSL has kept the stock at ‘Neutral’ — a marked deterioration from analyst sentiment just 18 months ago when IOC was widely rated a ‘Buy.’ In the past one month alone through early April 2026, IOC’s stock declined approximately 27% against an 11% fall in the benchmark Sensex, a staggering underperformance that reflects the market’s assessment of the earnings destruction underway.
Bharat Petroleum Corporation is India’s second-largest OMC by market share, with a 21% share of the petroleum marketing segment. It operates three major refineries — Mumbai, Kochi, and Bina — and has been one of the more aggressively expanding PSUs in recent years, having signed joint ventures for green hydrogen and renewable energy. BPCL’s stock fell approximately 28% in a single month through early April 2026, hitting close to its 52-week low of ₹262.95. PL Capital has a target price of ₹332 on BPCL, while MOFSL assigns a ‘Neutral’ with a target of ₹306 — both significantly below where the stock was trading just a year ago.
Hindustan Petroleum Corporation is the smallest of the three but arguably carries the highest financial risk at this juncture. HPCL has historically operated with the thinnest margins and the highest leverage among the three OMCs, making it most vulnerable to a sustained under-recovery cycle. HPCL’s stock slipped 5% in a single session in early April to ₹318.10, trading close to its 52-week low of ₹316.20 touched on March 23, 2026, with a one-month decline of approximately 25%. MOFSL has flagged HPCL as a “truce play” — meaning a stock that recovers primarily if the Middle East conflict de-escalates and crude prices fall — rather than a fundamental buy at current prices.
What Fitch’s warning actually means
Credit rating agencies do not use words like “brittle” casually. Fitch noted that New Delhi had previously intervened through excise duty cuts, retail price adjustments, and direct compensation, with the Centre reportedly considering a ₹30,000–₹35,000 crore subsidy payout to OMCs for LPG losses alone. Fitch had not factored any of these government support measures into its statement, meaning policy relief could offset the credit warning.
The implicit message from Fitch is that the OMCs’ financial profile is now entirely dependent on government action — their standalone creditworthiness, stripped of the sovereign support assumption, would be significantly lower than their current ratings suggest. This matters because all three OMCs raise large amounts of debt in domestic and international capital markets to fund their working capital and capex programmes. If their standalone credit profiles deteriorate further, the cost of this borrowing rises, compounding the financial damage from under-recoveries.
OMCs’ LPG under-recoveries alone have risen to ₹53,700 crore, whereas the government has announced LPG compensation of ₹30,000 crore to be disbursed — leaving a gap of over ₹23,000 crore uncompensated even on the LPG line alone, before accounting for petrol and diesel losses.
The historical context: India has been here before
This is not the first time India’s OMCs have been pushed to the financial edge by a combination of high crude prices and political reluctance to raise pump prices. The 2011-2013 period under the UPA government saw similar — and in some ways worse — dynamics play out. IOC posted its largest-ever quarterly loss of ₹7,486 crore for Q2 FY12, while BPCL and HPCL together posted combined losses exceeding ₹12,000 crore for the first half of that fiscal year. The three companies were collectively losing over ₹211 crore per day at the peak of that crisis.
The resolution then came through a combination of excise duty cuts, upstream sharing of under-recoveries by ONGC and Oil India, and eventually fuel price deregulation — petrol was deregulated in 2010, diesel in 2014. The current crisis is structurally different in one important respect: petrol and diesel are technically already deregulated, yet the government has chosen not to revise prices, effectively re-introducing the subsidy regime it officially abandoned a decade ago.
What comes next: The ₹4-5/litre question
Given current crude oil prices and the losses companies are enduring, an increase of 20% in petrol and diesel prices could be a “comfortable” level of hike, though such a steep increase seems unlikely. Kotak Institutional Equities said in a report that retail fuel prices may be hiked by ₹25-28 per litre after state elections in West Bengal and Tamil Nadu, based on an Indian crude basket of $120 per barrel. The oil ministry termed that report “fake news,” but the elections are now over — West Bengal results were declared, the Tamil Nadu election has concluded with TVK chief Vijay taking oath as Chief Minister on May 10 — and the political cover for continued price suppression has correspondingly narrowed.
Sources told Business Today that petrol and diesel prices could be hiked before May 15 as public sector OMCs continue to suffer heavy under-recoveries estimated at nearly ₹30,000 crore per month. The most likely scenario being discussed — a ₹4-5/litre hike on petrol and diesel, and ₹40-50 on LPG cylinders — would reduce but not eliminate the under-recovery. At $126/barrel crude, even a ₹5/litre hike would still leave the OMCs absorbing meaningful losses per litre, but it would slow the balance sheet deterioration and signal to markets that the price freeze era is ending.
What a continued freeze would mean
If the government chooses not to act — or acts too slowly and too modestly — the consequences compound. The OMCs’ capex plans, already under pressure, would be the first casualty. All three companies have ambitious expansion programmes: IOC is building new refining capacity, BPCL has committed to green energy investments, and HPCL is expanding its Rajasthan refinery. Sustained losses redirect management attention and financial resources from growth to survival, delaying India’s energy infrastructure build-out at precisely the moment the country needs it most.
The second casualty would be the dividend stream to the government. The three OMCs together contribute thousands of crores annually in dividends to the central exchequer, which in turn partly funds social schemes. A prolonged loss cycle disrupts this revenue flow, creating a secondary fiscal problem on top of the primary one of rising energy costs.
The third and most systemic risk is what Fitch flagged — a deterioration in the OMCs’ ability to raise market borrowings at reasonable cost. If the market begins to price in a standalone credit risk premium on IOC, BPCL, and HPCL debt, their borrowing costs rise, their interest burden increases, and the financial hole they are trying to climb out of gets deeper with every passing month.
India has navigated this crisis before. But the longer the freeze continues at $126/barrel crude, the more expensive the eventual correction becomes — for the companies, for the government, and ultimately for the consumer who will pay not just the delayed price hike but the accumulated cost of deferral.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors are advised to consult a registered financial advisor before making any investment decisions. Business Upturn does not hold any position in the securities mentioned.