Oil marketing companies are selling petrol and diesel at a loss of ₹14 per litre and ₹18 per litre, respectively, as elevated crude prices outpace capped retail fuel rates, squeezing marketing margins.
Besides losses on petrol and diesel, the elevated energy prices post West Asia crisis are likely to leave companies with an under recovery of ₹80,000 crore on cooking gas LPG in the current fiscal, while fertiliser subsidy is projected to rise to ₹2.05 to 2.25 lakh crore.
Rating agency Icra said supply disruptions in the Strait of Hormuz – handling around 20 per cent of global oil and LNG trade – have tightened availability of fuels, fertilisers and chemicals, pushing up prices and increasing cost pressures across downstream industries.
Crude prices before the West Asia crisis broke out two months back were around $70-72 a barrel.
“The stable pump prices for auto fuels amid elevated crude oil prices are impacting the profitability of the oil marketing companies (OMCs),” said Prashant Vasisht, Senior Vice President and Co-Group Head, Icra.
“At crude prices of $120-125 per barrel, marketing margins on petrol and diesel are estimated to be negative ₹14 a litre and ₹18 per litre, respectively.” Icra estimates LPG under-recoveries could reach ₹80,000 crore in FY2027, if current trends persist, while the fertiliser subsidy burden is projected to rise to ₹2.05-2.25 lakh crore, above the budgeted Rs 1.71 lakh crore.
Elevated raw material and energy costs are expected to weigh on profitability across oil marketing, fertilisers, chemicals and city gas distribution sectors, with limited ability to fully pass on higher costs to end consumers.
“Overall, Icra’s outlook on the crude oil refining segment remains stable…while the outlook on the fuel retailing, fertiliser, basic chemicals and petrochemical sectors remains negative,” Vasisht added.
Icra expects the pressure on margins and credit profiles to persist in the near term, with any relief contingent on easing geopolitical tensions and normalisation of global supply chains.
The fertiliser sector is also facing sharp cost escalation, driven by higher sulphur and ammonia prices and elevated natural gas costs. Urea pool prices have risen to about USD 19 per million British thermal unit in April 2026 from USD 13 before the crisis.
“Significant raw material price inflation coupled with inadequate subsidy revision is set to moderate the profitability of the P&K fertiliser players,” Vasisht said, adding that weather risks could further limit farmers’ ability to absorb price hikes.
Chemical and polymer prices have surged amid disrupted trade flows and higher fuel costs, prompting stockpiling by manufacturers and consumers. However, Icra expects demand to normalise once inventory buildup subsides, particularly in segments exposed to global oversupply.
City gas distributors face margin pressure from rising gas prices and currency depreciation. While profitability in piped natural gas (PNG) for households remains relatively stable due to priority gas allocation, compressed natural gas (CNG) margins are expected to weaken as cost increases are only partially passed on.
Icra said elevated energy and input costs will likely compress margins across multiple sectors, leading to weaker credit profiles in some cases.