Fuel price rise likely provides Rs 52,700 crore relief to OMCs: Report

Fuel price hike could cut OMC losses by up to Rs 52, 700 crore, says SBI report. At the same time, depreciation of the rupee by Rs. 2 from FY27 avg. to the dollar could offset gains from the fuel price revision, the report warned

New Delhi: The recent retail fuel price increase of Rs 3 per litre will trim mounting losses at oil marketing companies and provide up to Rs 52,700 crore worth of relief in their under‑recoveries, a report said on Saturday.

The report from SBI Research said that the relief is equal to roughly 15 per cent of the expected total loss of OMCs in FY27.

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Under‑recoveries on petrol and diesel have surged because retail prices were kept unchanged amid rising Brent crude, with the government estimating OMC losses at about Rs 1,000 crore per day and roughly Rs 3.6 lakh crore a year.

The report said the fuel price hike is unlikely to reduce annual oil consumption, as historical patterns showed consumption dips immediately after price hikes but recovers over the year.

“Further, immediate impact on CPI inflation is likely around 15-20 bps in May-June 2026. So, we revise our FY27 forecast to 4.7 per cent. There is no direct impact of this hike on the fiscal situation,” the report noted.

Notably, the government has earlier reduced the excise duty by Rs 10 on diesel and petrol during the year to help the OMCs for which the revenue loss for the centre is estimated as Rs 1.1 lakh crore.

A similar rationalisation of excise to zero to aid OMCs would cost the centre about Rs 1.9 lakh crore and states about Rs 80,000 crore.

The report flagged that a further depreciation of the rupee could negate the intended benefits, saying that an additional depreciation of Rs 2 from the FY27 average of Rs 94 to the dollar would fully offset the gains from the domestic fuel price revision.

“The rupee has already approached a critical depreciation threshold, beyond which further currency weakness could substantially erode the intended benefits of domestic fuel price revisions,” it explained.