Oil companies have suffered huge losses in the April-June quarter. There was a loss of ₹18.9 per liter on diesel and ₹6 on petrol as domestic prices remained stable despite the rise in international prices.
New Delhi: Even though the prices of petrol and diesel have remained stable in the country, the government oil companies are incurring huge losses. According to a report by ICICI Securities, companies incurred a loss of Rs 18.9 on every liter of diesel sold and Rs 6 on petrol in the April-June quarter. The reason for this is that the profit or loss of companies is not determined only by the prices of crude oil in the international market.
In the same quarter last year, companies had earned a profit of Rs 8.2 per liter on diesel and Rs 10.3 per liter on petrol. But in this quarter, the prices of both crude oil and refined fuel skyrocketed in the international market. Despite this, prices were not increased in the domestic market, which pushed the companies into huge losses.
Then how is the price of petrol and diesel decided?
The price that you and I pay at the petrol pump includes many things. The price of the refinery is decided on the basis of the rate of refined fuel in the international market. After this, the transport cost of taking the fuel to the depot and pumps i.e. ‘Freight and Logistics’ is added. Apart from this, the operational expenses of the oil companies like ‘marketing and distribution’, ‘dealer commission’ paid to pump owners and government taxes (central excise duty and state VAT) also form part of the price. What is left to the oil companies after all these expenses is their ‘retail margin’ i.e. profit or loss.
When fuel becomes expensive in the international market and prices do not increase in the domestic market, the retail margins of oil companies reduce. On the contrary, when prices fall in the world and prices remain stable here, companies make huge profits.
Why is the deficit increasing so much?
ICICI Securities says that the main reason for this loss is the increase in fuel prices in the international market and stable prices in India during April-June. Union Petroleum Minister Hardeep Singh Puri had also recently said that in this quarter, oil companies have suffered a loss of about Rs 75,000 crore due to selling petrol, diesel, LPG and aviation fuel below the market price.
This setback has come at a time when companies had earned good profits in the last two business years. According to ICICI Securities data, there was a loss of Rs 18.9 on diesel and Rs 6 on petrol in the April-June quarter of FY 2026. At the same time, in the same quarter of FY 2025, there was a profit of Rs 8.2 on diesel and Rs 10.3 on petrol. In the June quarter of FY25, the margin on diesel was Rs 2.5 and on petrol was Rs 4.4. If we look at the highest margins of the last two business years, there was a profit of Rs 8.2 on diesel in the first quarter of FY 2026 and Rs 12 on petrol in the third quarter of FY 2025.
Crude oil rate alone is not everything
Often people believe that as soon as the price of crude oil falls, the prices of petrol and diesel should also reduce immediately. But the reality is that apart from crude oil, the prices of refined petroleum products in the international market also affect the fuel prices in India. Oil companies rely on the prices of refined fuel in markets like Singapore and Dubai. Transport costs, insurance amount and fluctuations in the value of the rupee against the dollar also play an important role in determining the price.
The Petroleum Minister has also told that the fuel being sold at the pumps today is made from crude oil purchased weeks ago. Therefore, the current prices reflect the cost of that time and not today’s crude oil price.
Opinions of experts also differ
There is disagreement among economic experts regarding the calculation of profits and losses of companies. While ICICI Securities is talking about huge losses in the April-June quarter, some other experts argue that the profits of the companies have improved due to the fall in the price of Brent crude to $ 72-73 per barrel. This difference in opinion is due to timing of fuel purchase, price of refined fuel in the international market and storage costs are calculated differently.