The Indian government has recently announced an increase in LPG prices by Rs 50, along with a proposed Rs 2 rise in excise duty on petrol and diesel. This move aims to support oil marketing companies (OMCs) in recovering from their staggering Rs 41,338 crore losses recorded in the fiscal year 2025. According to sources cited by CNBC TV18, state-owned OMCs such as Hindustan Petroleum, Bharat Petroleum, and Indian Oil Corporation are projected to generate nearly Rs 9,000 crore in the upcoming fiscal year 2026.
Government’s Compensation Strategy
In a bid to address these financial setbacks, senior officials from the Oil Ministry are preparing to present a Rs 32,000 crore compensation package to the Cabinet. This initiative is designed to mitigate the heavy losses incurred by OMCs due to subsidized LPG sales in FY25. The anticipated revenue from the excise duty hike on petrol and diesel will play a crucial role in this recovery plan.
- Current excise duties:
- Petrol: Rs 19.9 (to increase to Rs 21.9)
- Diesel: Rs 15.8 (to increase to Rs 17.8)
Ministerial Assurance on Consumer Impact
Despite the looming excise duty increase, Oil Minister Hardeep Singh Puri has assured the public that the additional costs will not be passed down to consumers. He stated that oil companies will absorb the hike, attributing this decision to expected improvements in profit margins.
Market Conditions Favorable for OMCs
An official report highlighted that crude oil prices have recently softened, currently averaging around $75 per barrel. With projections suggesting stabilization between $60 and $65 per barrel, OMCs are anticipated to enjoy enhanced profit margins moving forward.
This strategic approach by the government not only aims to stabilize the financial health of OMCs but also reflects an effort to balance market conditions while protecting consumers from immediate price impacts. As the fiscal landscape evolves, stakeholders will be closely watching how these changes unfold in the coming months.
