New Delhi, The recent ₹3 per litre increase in petrol and diesel prices is expected to provide significant relief to state-run oil marketing companies (OMCs) by reducing mounting under-recoveries, according to a report released by SBI Research on Saturday.
The report estimated that the fuel price revision could lower OMC losses by nearly ₹52,700 crore, equivalent to around 15% of the projected total under-recoveries for FY27.
Public sector oil retailers have been facing sharp financial pressure as retail fuel prices remained largely unchanged despite a sustained rise in global Brent crude oil prices. Government estimates suggest OMCs are currently incurring losses of nearly ₹1,000 crore per day, translating into an annual burden of approximately ₹3.6 lakh crore.
The report noted that although fuel demand typically sees a temporary slowdown immediately after price increases, historical trends indicate that annual oil consumption remains largely resilient over the longer term.
According to SBI Research, the fuel price hike is expected to have a limited inflationary impact, with headline consumer price inflation likely to rise by around 15–20 basis points during May and June 2026. The research team consequently revised its FY27 inflation forecast upward to 4.7%.
The report also stated that the latest fuel price increase would not directly affect the government’s fiscal position.
Earlier, the Centre had reduced excise duty on petrol and diesel by ₹10 per litre to cushion consumers from rising global oil prices, resulting in an estimated revenue loss of ₹1.1 lakh crore for the government.
SBI Research further noted that any additional excise duty rationalisation aimed at supporting OMCs could significantly strain public finances. According to the report, a complete reduction of excise duty to zero would cost the Centre nearly ₹1.9 lakh crore and state governments around ₹80,000 crore in revenue losses.
The report also highlighted currency risks as a key concern for India’s fuel economics. It warned that further depreciation of the rupee could offset the financial gains from the domestic fuel price revision.
According to the analysis, an additional depreciation of ₹2 from the FY27 average exchange rate assumption of ₹94 per US dollar could effectively neutralise the benefits of the fuel price increase.
“The rupee has already approached a critical depreciation threshold, beyond which further currency weakness could substantially erode the intended benefits of domestic fuel price revisions,” the report said.
The findings underline the delicate balance policymakers face between controlling inflation, protecting consumers, maintaining fiscal stability, and ensuring the financial sustainability of India’s state-run energy companies amid heightened global crude oil volatility.
