New Delhi: State-owned fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) absorbing the impact of high global energy prices will lead to increased margin and cash flow volatility, Moody’s Ratings said on Wednesday.
“Domestic retail fuel prices have remained largely stable since April 2022, despite fluctuations in global oil and gas prices and the country’s high dependence on imports,” Moody’s said in a note.
“Companies will bear increased input costs from higher energy prices without a corresponding increase in retail prices, because government influence over the retail price prevents timely cost pass-through.” The three firms control nearly 90 percent of retail fuel outlets in the country.
Global benchmark Brent crude rose sharply to hit a high of $119 a barrel on March 9 before settling just below $90 the next day, reflecting an increased geopolitical risk premium.
However, retail pump rates have not been revised as the three oil marketing companies (OMCs) continue to absorb elevated global energy prices.
“This reflects their role in supporting domestic fuel price stability,” the rating agency said.
Domestic retail gasoline and diesel prices have remained largely unchanged since April 2022, despite global oil and gas price volatility, reflecting government involvement in fuel prices.
“The influence of the government is reinforced by the strong position of the OMCs in the market, as they operate close to 90 percent of the retail fuel outlets,” he said.
“Limited accommodation in domestic fuel prices will continue to shift cost pressures to OMCs.” India is highly dependent on imported oil and gas, which directly exposes the cost base of OMCs to movements in global energy prices.
India imported 88 per cent and 51 per cent of its oil and gas requirements, respectively, in the fiscal year to March 2025 (fiscal 2024-25).
When international prices rise, procurement and processing costs rise, while OMCs’ realized prices for key fuels do not adjust in line with costs. “This gap compresses marketing margins and weakens operating cash flows, particularly during periods of sustained high energy prices,” he said.
During the period of rising oil prices following the Russia-Ukraine conflict in 2022, all three OMCs suffered significant losses in the 2022-23 fiscal period. However, these gasoline and diesel sales losses were temporary and were partially offset later when crude oil prices softened, resulting in higher marketing profits as retail prices remained unchanged.
“Similarly, the recent rise in energy prices is likely to put pressure on OMCs’ earnings in the short term, but we expect their earnings to recover as prices subsequently normalize,” Moody’s said.
India stands out among major Asian economies that rely on crude oil from West Asia. The country holds crude reserves covering 74 days of net oil imports.
To ease global crude supply constraints caused by the closure of the Strait of Hormuz, the US government has also given a 30-day waiver for India to buy stranded Russian oil. Together, these measures increase crude supply options for OMCs.
“To Middle East it is also the main source of LPG for India and supplies have been severely disrupted by recent events. The government has instructed all refiners in the country to maximize LPG production to ensure continuous supply to local consumers,” the announcement said.
Reflecting higher international prices, domestic LPG prices were also hiked by Rs 60 per 14.2 kg cylinder on March 7.
“We expect the OMCs’ losses to accrue from selling LPG domestically below market prices, but they may be compensated later by the government,” he said, adding that in August 2025, the government approved Rs 30,000 crore in total compensation to the three OMCs, which will be disbursed in 12 equal monthly installments2025, starting from November.
The OMCs had incurred losses amounting to approximately Rs 40,000 crore in fiscal 2024-25.
