In recent days, petrol and diesel prices have increased by approximately Rs 7.5 per litre, raising daily costs for consumers. This has reignited the familiar debate about whether oil marketing companies (OMCs) are making windfall gains amid the Middle East crisis.
The Profit Figure in Context
At the center of this discussion is a headline number: a combined profit of Rs 77,821 crore in FY 2025-26. While this sounds substantial, the reality is more nuanced. When considering margins, total turnover, past losses, and global oil price fluctuations, the picture is not straightforward.
The government had already reduced excise duty on petrol and diesel by Rs 10 per litre on March 27. Earlier this week, Union Finance Minister Nirmala Sitharaman stated that reducing excise duties would lead to a revenue loss of around Rs 1 lakh crore. "The government is estimated to take a revenue impact of over Rs one lakh crore in 2026 after the central excise duty cut on petrol & diesel," the FM noted.
Since the onset of the crisis, retail fuel prices in India have risen by around 8-9%, significantly lower than the 20-67% increases seen in neighboring economies. For instance, in Nepal, petrol is priced at Rs 136.47 per litre and diesel at Rs 141.50 per litre, while in Pakistan, petrol costs Rs 139.17 per litre and diesel Rs 138.82 per litre.
Are OMCs Benefiting from the Crisis?
Union Minister Hardeep Singh Puri had earlier mentioned that OMCs were losing nearly Rs 1,000 crore per day. After four rounds of fuel price hikes, questions arise about whether their financial situation has improved. "If you look at the fiscal situation, if you look at the fact that my oil companies are losing Rs 1,000 crores every day, the under recovery is going to be Rs 1,98,000 crores. The losses are Rs 1 lakh crore, if you look at the quarter. In that context, how long can you keep it like this? Where is the oil? It used to be around $64 or $65. It has gone up to $115 in that basket," Minister Puri explained.
Even after OMCs reported a Rs 77,821 crore profit for FY26, most of the impact from the Middle East crisis has not yet fully materialized in current earnings. It is expected to become evident in Q1 FY 2026-27 results.
Another key factor is timing. Indian OMCs were operating with 50-60 days of crude inventory purchased at pre-crisis prices. Thus, FY 2025-26 profits largely reflect cheaper, earlier crude purchases. The impact of higher crude prices will start appearing only when newer, costlier crude enters the system, mainly from late March onward. This means the real pressure is likely to show up in Q1 FY 2026-27 results, which will be released in August 2026.
Because of this lag, the current profit figures do not fully capture the crisis impact. If crude prices remain high, OMCs could face stress in the coming quarters, potentially exceeding the current profit pool.
Understanding 'Super Normal Profits' for OMCs
On paper, the Rs 77,821 crore profit represents a 3-4% margin on a massive turnover of nearly Rs 20 lakh crore. In commodity businesses like refining and fuel retailing, this is generally considered a normal range.
Take Indian Oil Corporation, for example. It has a turnover close to Rs 10 lakh crore, with profits typically around Rs 20,000-30,000 crore, translating to a margin of about 3%. Across the sector, OMCs usually operate on thin margins of around 1-3% over a full cycle. This is because fuel pricing is highly sensitive to global crude movements, government policies, and time lags in cost recovery.
Looked at another way, if a business with Rs 20 lakh crore turnover made just Rs 2,000 crore profit, the margin would fall to 0.1%, too low for a company of this scale to function smoothly, manage cash needs, or plan future investments. That is why OMCs require a steady profit pool to keep operations running and fund large investments like refinery expansion, renewable energy projects, pipelines, storage systems, and long-term energy security needs.
On a global scale, India's OMC profit pool is relatively modest. In recent years, trading house Vitol has reported annual profits of around $35 billion. Major global energy companies such as BP, Shell, ExxonMobil, and Chevron have posted profits running into tens of billions of dollars in the post-2022 cycle. In comparison, the combined Indian OMC profit of Rs 77,821 crore translates to roughly $9 billion. ExxonMobil alone routinely posts annual profits more than three times the combined Indian OMC pool, while Vitol can generate nearly four times that amount in a strong year. By this comparison, Indian OMC profits are not considered super-normal.
The Huge Profit Jump
Some commentators have pointed to the Rs 77,821 crore profit in FY 2025-26 as a 130% jump over FY 2024-25 and called it a windfall during a crisis. However, this comparison is misleading due to an "artificially depressed base." FY 2024-25 OMC profit stood at Rs 33,602 crore, which is Rs 47,384 crore lower than FY 2023-24. The decline was driven almost entirely by Rs 40,434 crore in absorbed under-recoveries on domestic LPG during that year.
When compared against a three-year cycle — FY 2023-24 (Rs 80,986 crore), FY 2024-25 (Rs 33,602 crore), and FY 2025-26 (Rs 77,821 crore) — the average profit comes to around Rs 64,000 crore per year. This is presented as a more accurate baseline for any windfall assessment, rather than a single-year comparison that distorts the impact of LPG absorption in FY 2024-25.
Where Do OMC Profits Go?
A key structural feature of the OMC system is ownership: the companies are majorly state-owned. Roughly half of the annual profit is returned to the government as dividends, in addition to corporate tax contributions. This dividend income supports public expenditure on roads, highways, railways, metros, and broader infrastructure development. The remaining retained profit is used for capital expenditure, including refinery expansion, energy diversification, pipeline infrastructure, and long-term capacity building.
In FY 2024-25, OMCs absorbed Rs 40,434 crore in LPG under-recoveries to maintain the domestic cylinder price at Rs 550. That burden was funded from the same profit pool that is now under scrutiny and has since been compensated.
Meanwhile, at the center of the whole debate are soaring global crude prices, which have jumped from the $70 per barrel mark before the Middle East conflict to beyond $100, continuously fluctuating. The crisis, now in its third month, has escalated since the US and Israel launched joint strikes on Iran on February 28. After the attacks, Tehran tightened its grip on the strategically crucial Strait of Hormuz, which carries 20% of the globe's energy supplies. As oil shipments remain under pressure, economies worldwide are struggling with strained energy reserves and price hikes.
