Complete mathematics of oil companies’ earnings
Amid the recent crisis at the Strait of Hormuz in West Asia and disruption in crude oil supply, India’s state-owned oil companies (OMCs) have reported a handsome profit of Rs 77,821 crore in the financial year 2025-26. There are many discussions regarding this figure, but the real picture is very positive for the country and the people. On a huge turnover of around Rs 20 lakh crore, this is a very important and normal working margin of just 3 to 4 per cent, which is necessary for a healthy company.
The most important thing is that the country’s development and the general public are directly benefiting from this profit. Half of it goes to the government treasury in the form of dividend, due to which excellent infrastructure like highways, railways and metro is built in the country. At the same time, despite the international crisis, the government has kept the public completely safe from inflation by reducing the excise duty on petrol and diesel on 27 March 2026. Let us understand through simple questions and answers how government oil companies have best protected the country’s economy and the interests of consumers.
Question 1: How did the profits of oil companies increase compared to last year?
answer: This surge is not a windfall. In fact, in the financial year 2024-25, the profit of these companies had come down to just Rs 33,602 crore. This happened because the companies themselves had incurred a huge loss (under-recovery) of Rs 40,434 crore for providing LPG cylinders to the people of the country at just Rs 550. Later the government compensated this amount. If we look at the average of the last three years, this profit comes to approximately Rs 64,000 crore annually. That is, this 130 percent jump is visible only because last year the companies had reduced their profits for the welfare of the public.
Question 2: What is the real truth about the profit of Rs 77,821 crore made by oil companies?
answer: It is important to look at the figures from the perspective of turnover. The total turnover of the three big government oil companies is about Rs 20 lakh crore. The profit of Rs 77,821 crore on this huge turnover is an operating margin of only 3 to 4 percent. No healthy business can run without this much margin. If companies do not make profits, how will the country’s future energy needs be met? The expansion of just one refinery costs Rs 50,000 to Rs 60,000 crore. Compared to foreign private companies (like Vitol, ExxonMobil), the profits of Indian companies are very modest and balanced.
Question 3: Have these companies benefited from the rise in crude oil prices due to the Hormuz crisis?
answer: no way. The Indian market remained completely safe during the Hormuz crisis. As part of the efficient strategy of Indian oil companies, they had 50 to 60 days of crude oil (crude inventory) purchased at old and cheap prices even before the crisis started. Therefore, expensive crude had no impact on the results of the fourth quarter (January-March 2026). The actual burden of expensive crude oil will be visible in the books of companies in the first quarter (April-June) of the financial year 2026-27.
Question 4: Amidst the international crisis, how did the government save the general public from the blow of inflation?
answer: The government showed great promptness and made a huge cut of excise duty on petrol and diesel by Rs 10 per liter on March 27, 2026, just four weeks after the crisis started. If we look at 2021, till now the government has already reduced tax by Rs 23 on petrol and Rs 26 on diesel. The result of this is that amid the worldwide outcry, fuel prices in India have increased by only 8 to 9 percent. Whereas in neighboring countries like Nepal and Pakistan, the prices of petrol and diesel have increased by 20 to 67 percent. This price stability policy of India has kept the country’s inflation rate within the safe range of 5-6 percent.
Question 5: Where do these huge profits go?
answer: Every penny of this profit is being useful to the country. About 50 percent of the profit is given to the government as dividend, which is spent directly on public facilities (roads, railways, hospitals). The remaining amount is used to increase refining capacity and make the country energy self-reliant (Capex Pipeline). The best thing is that since 2014, the current government has not issued a single new ‘oil bond’, so that there is no debt burden on the coming generations. On the contrary, the government is still paying off the old oil bonds of the UPA era worth Rs 1.3 lakh crore from the budget. Oil companies did not indulge in profiteering during the crisis, but rather protected the consumers’ pockets by becoming the backbone of the country’s economy.
