OMC Underrecoveries Hit ₹2.19 Trillion Despite Fuel Price Hikes

State-run oil marketing companies (OMCs) have reported underrecoveries of ₹2.19 trillion on the sale of petrol, diesel and liquefied petroleum gas (LPG) till 30 June, as they continued selling fuel below cost even after global energy prices surged. Petroleum and Natural Gas Minister Hardeep Singh Puri said the sharp rise in crude oil prices during the recent conflict in West Asia significantly increased the cost of supplying fuel to Indian consumers.

What Led To The Massive Underrecoveries?

Puri said the war in West Asia resulted in total losses of ₹74,781 crore for state-run oil retailers till 30 June. During the first quarter of FY27, underrecoveries stood at ₹19,905 crore on petrol, ₹1.44 trillion on diesel and ₹24,148 crore on LPG. In addition, oil companies were also carrying ₹30,720 crore of LPG underrecoveries from previous quarters.

The minister explained that an underrecovery is the gap between the cost of producing and selling a refined fuel and the price at which it is sold to consumers. This is different from overall losses, which reflect the combined financial performance across all petroleum products.

Why Are LPG Sales Still Loss-Making?

Although international crude oil prices have fallen sharply from around $120 per barrel in April to about $72 per barrel, Puri said oil companies continue to lose money on domestic LPG sales.

He explained that the fuel currently being sold at petrol pumps was produced using crude oil purchased around two months ago, when prices, insurance costs and freight charges were much higher. As a result, the benefit of lower crude prices has not yet fully reached consumers.

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"The $72 per barrel crude oil will come later in the country," Puri said while explaining the delay between global crude prices and retail fuel costs.

Puri said the government could consider reducing retail fuel prices if crude oil continues to remain at current levels for a longer period.

State-run oil retailers had raised petrol prices by ₹7.38 per litre and diesel prices by ₹7.52 per litre from 15 May to reduce mounting losses. It was the first increase in fuel prices in four years.