- Fuel price freeze pushes OMCs to cut refinery transfer prices
- Discounted rates impact refiners amid rising global oil prices
India’s state run oil marketing companies have started paying discounted rates to refiners for petrol, diesel, aviation turbine fuel, and kerosene to manage losses caused by a fuel price freeze. This move marks a first since fuel price deregulation and reflects pressure from rising global crude oil prices.
According to sources, the oil marketing companies fixed discounted rates on March 26, applicable from March 16. These rates are lower by up to Rs 60 per litre compared to import costs. Therefore, refiners receive less than the import parity price for fuels. This change affects both public and private sector refiners.
International oil prices have increased sharply, rising from about USD 70 per barrel before the Middle East conflict to over USD 100. However, retail petrol and diesel prices in India have remained unchanged. As a result, OMCs are absorbing losses. Meanwhile, they introduced discounts on refinery transfer price to reduce their financial burden.
For the second half of March, OMCs fixed a discount of Rs 22,342 per kilolitre on diesel. This reduced the refinery transfer price from Rs 85,349 per kilolitre to Rs 63,007 per kilolitre. Later, for the first half of April, the discount increased to Rs 60,239 per kilolitre, lowering the price from Rs 146,243 per kilolitre to Rs 86,004 per kilolitre.
Similarly, aviation turbine fuel saw a price cut after a discount of Rs 50,564 per kilolitre, bringing the rate down to Rs 76,923 per kilolitre. Kerosene prices also dropped, with a discount of Rs 46,311 per kilolitre, fixing the rate at Rs 77,534 per kilolitre. These adjustments show the scale of discounts applied across fuel categories.
The discounted pricing means refiners cannot fully pass on higher crude costs. Therefore, they must absorb part of the impact. Integrated companies like Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd, and Hindustan Petroleum Corporation Ltd may manage losses across operations. However, standalone refiners face greater pressure.
Refiners such as Mangalore Refinery and Petrochemicals Ltd, Chennai Petroleum Corporation Ltd, and HPCL-Mittal Energy Ltd are expected to be hit the most. These firms depend heavily on selling fuel to OMCs and have limited retail presence.
The pricing shift could also affect private refiners like Nayara Energy and Reliance Industries Ltd if similar discounts apply. These companies supply a large share of petrol and diesel to OMCs, which operate most fuel stations in India.
The Ministry of Petroleum and Natural Gas stated, “With global petroleum prices up by up to 100 per cent in the last one month, PSU OMCs are incurring under-recoveries of Rs 24.40 per litre on petrol and Rs 104.99 per litre on diesel at retail selling price (RSP) level as on 01.04.2026.” This highlights the growing financial strain.
Overall, the fuel price freeze has shifted the burden across the refining sector. While OMCs aim to limit losses, analysts say the move may impact standalone refiners more sharply and affect market linked pricing.
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