India Refiners: India OMCs: Extended Pause in Fuel Prices & Duties Warranted

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India Refiners: India OMCs: Extended Pause in Fuel Prices & Duties Warranted

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02 Jul 2026 04:34:07 ET │ 16 pages

India Refiners

India OMCs: Extended Pause in Fuel Prices & Duties Warranted

CITI’S TAKE

The national service obligation borne by the OMCs is likely to be reflected

in their 1QFY27 earnings which, we estimate, will result in a combined net

loss of >Rs300bn. To restore balance sheet strength following the

meaningful ~7-15% networth erosion, we would argue for an extended

pause in both excise duties as well as retail prices of auto fuels. The gov’t Saurabh HandaAC

has historically adopted a similar approach, allowing the OMCs to recoup +91-22-6175-9858

prior losses and sustain through-cycle ROEs of c.20% (Figure 2). With saurabh.handa@citi.com

global oil markets normalising more rapidly than gas markets as

Prerna Goenka

geopolitical concerns ease, we believe the OMCs offer favourable

prerna.goenka@citi.com

risk/reward over the coming months. We have an open Positive Catalyst

Watch on BPCL.

1QFY27E losses — We estimate the combined losses of the 3 OMCs at >Rs300bn,

implying a networth erosion of ~7%/10%/15% for IOCL/BPCL/HPCL, respectively

(Figure 1). We note that reported earnings could differ materially from our estimates,

given the uncertainty around the timing and magnitude of inventory moves and

related accounting impacts.

Margin outlook — Post-conflict in the Middle East, the sequencing of gov’t actions

on auto fuels was: (1) Excise cuts (Rs10/ltr), followed by (2) Re-introduction of export

taxes (currently at Rs8.5/ltr on diesel and Rs4/ltr on petrol), and culminating in (3)

Retail price hikes (cumulatively ~Rs7.5/ltr). With crude prices having retreated but

product cracks still elevated ($30+ currently for gasoline vs. ~$10 pre-conflict, $40+

vs.