OMCs To Pay Lower Rates To Refiners Amid Fuel Price Freeze

India’s fuel pricing system is showing clear signs of stress. Crude oil has climbed from roughly $70 per barrel to over $100, but petrol and diesel prices at retail outlets have stayed unchanged for a long time. That mismatch is costing state-run oil marketing companies (OMCs) heavily.

As of 1 April 2026, losses stood at ₹24.40 per litre on petrol and ₹104.99 per litre on diesel.

What Has Changed In Fuel Pricing?

To deal with these losses, OMCs have quietly changed how they pay refineries. Instead of following import-linked pricing, they have reduced the refinery transfer price (RTP), which is the rate at which refiners sell fuel internally to OMCs.

The revised rates are effective from 16 March. The discount is not small. In some cases, it goes up to ₹60 per litre below import cost.

For diesel, RTP in the second half of March was brought down from ₹85,349 per kilolitre to ₹63,007 per kilolitre. In early April, it was reduced from ₹146,243 per kilolitre to ₹86,004 per kilolitre.

Aviation turbine fuel saw its RTP drop from ₹127,486 per kilolitre to ₹76,923 per kilolitre. Kerosene followed the same trend, falling from ₹123,845 per kilolitre to ₹77,534 per kilolitre.

In effect, refiners are now being paid less for every litre they supply.

Who Is Bearing The Cost?

The impact is not evenly spread. Large public sector companies such as Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) operate both refineries and fuel retail networks. That gives them some flexibility to manage losses across segments.

Standalone refiners are in a tighter spot. Mangalore Refinery and Petrochemicals Ltd (MRPL), Chennai Petroleum Corporation Ltd (CPCL), and HPCL-Mittal Energy Ltd (HMEL) depend largely on selling fuel to OMCs. With the RTP cut, their per-unit realisation may drop immediately. Unlike integrated firms, they do not have a wide retail base to offset lower refining income. So the hit shows up directly in the margins.

There is also a spillover risk. Private refiners such as Reliance Industries and Nayara Energy supply a large share of fuel to OMCs. If the same pricing formula is applied to them, their domestic sales margins could also come under pressure.

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What Happens Next?

For consumers, nothing changes immediately. Pump prices may remain where they are, but the cost has not disappeared. It has simply moved within the system.

Right now, OMCs are sharing the burden with refiners instead of passing it on to buyers. That arrangement depends on how long crude prices stay high and how much financial strain companies can absorb.

If crude remains elevated, the gap will widen further. At that point, the choices become limited. Either retail prices are revised, or losses continue to build across the supply chain.

The current step shows that while fuel pricing is officially deregulated, it is still being adjusted when pressures rise. The question is not whether the system is under strain. It is how long this adjustment can continue before a more direct correction is made.

Sources:

Mint

The Economic Times