After Raking Rs 34k Cr Net Profit in H1 FY26, OMCs Get Excise Duty Cut

Chennai: After earning a combined net profit of over Rs 34,000 crore in the first half of FY26, oil marketing companies are being offered excise duty cuts to cushion the margins, which went into negative territory in the past few weeks with the rise in crude oil prices due to Iran war. OMCs are most likely to increase the retail prices of petrol and diesel if crude prices go up further.

According to the government, the Rs 10 per litre excise duty cut on petrol and diesel is meant to reduce the under-recoveries being absorbed by public sector oil marketing companies (OMCs). At current international crude prices, under-recoveries stand at approximately Rs 26 per litre on petrol and Rs 81.90 per litre on diesel. The combined daily under-recovery being absorbed by OMCs is approximately Rs 2,400 crore. The excise reduction offsets Rs 10 per litre of these losses, ensuring OMCs can continue to supply fuel without disruption while keeping retail prices unchanged, it said.

“The government has taken a substantial impact on its taxation revenues to reduce the high losses being faced by oil marketing companies at this time of sky-high international prices,” said Hardeep Singh Puri, Minister for Petroleum and Natural Gas.

However, the OMCs have been making windfall profits before the war started and crude prices began surging. In H1 FY26, IOC, BPCL and HPCL had posted a combined net profit of Rs 34,066.51 crore - 269.4 per cent year-on-year jump, exceeding their full-year profit of FY25.

IOC profit rose 371 per cent to Rs 13,299 crore, HPCL surged 731 per cent to Rs 8,201 crore, and BPCL grew 132 per cent to Rs 12,566 crore in H1 FY26.

According to a Crisil report, OMCs were projected to achieve robust operating profit of $18–$20 per barrel in FY26, marking a rise of over 50 per cent from the previous year’s $12 per barrel, expecting prices to remain around $65–$67 per barrel during the fiscal. Apart from supplying to the domestic market, Indian refiners had exported 64.7 million tonnes of petroleum products valued at $47.7 billion in FY25.

OMCs were also set to generate Rs 75,000– Rs 80,000 crore in cash accruals during FY26, up from Rs 55,000 crore in FY25.

Refiners were earning Rs 12 per litre on petrol and Rs 10 per litre on diesel when the crude prices were below $70 per barrel. Further, discounted crude from Russia were adding to the profit margins.

As per reports, Indian crude oil basket has spiked towards $149 per barrel in March, while the Brent crude touched a high of $119 per barrel and are currently trading around $115.

Low procurement from Russia, higher premiums over benchmark rates, shortage of Middle East light crude and the purchase of dense and costlier crude from Venezuela and the US and higher transportation cost from distant sources are some of the reasons why Indian crude basket has become costlier than the benchmark rates.

According to Prashant Vasisht, Senior Vice President and Co-group Head, Corporate Ratings, ICRA, the margins of OMCs will again become negative if Brent prices rise to $125 levels. Hence, they are likely to increase retail rates of petrol and diesel in the near future.