OMCs impose sharp discounted refinery prices amid fuel freeze

Business Desk MUMBAI

Indian state-run oil marketing companies (OMCs) have begun paying refiners discounted rates for petroleum products to contain mounting losses arising from a prolonged freeze in retail fuel prices, marking a significant shift since deregulation.

 According to sources, OMCs on March 26 fixed rates for petrol, diesel, aviation turbine fuel and kerosene at discounts of up to ₹60 per litre compared to import-parity costs. 

 These rates, effective from March 16, are expected to hit standalone refiners such as MRPL, CPCL and HMEL the hardest, PTI  reported on Sunday.

 The move comes as global crude prices surged from around $70 per barrel before the West Asia conflict to over $100, while domestic petrol and diesel prices have remained unchanged. To manage widening under-recoveries, OMCs have adjusted the refinery transfer price, effectively paying refiners below market-linked costs.For the second half of March, diesel saw a discount of ₹22,342 per kilolitre, reducing RTP to ₹63,007 per kl. 

 In early April, the discount widened to ₹60,239 per kl, lowering RTP further. Similar cuts were applied to ATF and kerosene, with substantial reductions in RTP after discounts exceeding ₹46,000–₹50,000 per kl.  While integrated players such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation may partly offset the impact through their marketing arms, standalone refiners dependent on market-linked pricing face sharper margin pressure. 

 The pricing adjustment aims to distribute financial strain across the refining ecosystem. However, analysts caution that it could disproportionately affect independent and private refiners like Nayara Energy and Reliance Industries if extended to them. With fuel prices frozen since April 2022 and no compensation, OMCs face rising under-recoveries, intensifying sector pressure..