New Delhi:
Roughly half the profit that oil firms make each year are returned to the centre as as dividend, with corporate tax on top. It funds roads, highways, railways, metros and the broader public investment programme, sources have said, citing queries on the profits of oil marketing companies or OMCs.
The portion retained by the OMCs are used for capital expenditure – including refining capacity expansion, diversification of renewable energy, pipeline and storage infrastructure, contingency reserves, and the long-term build-up required for energy security, affordability and self-sufficiency, sources said.
A single refinery expansion programme costs anything between Rs 50,000 crore and Rs 60,000 crore. The companies need around Rs 1,00,000 crore in annual profit to sustain this capex pipeline, sources said.
Citing an example, sources said in 2024-25, when the OMCs absorbed Rs 40,434 crore in LPG under-recoveries to keep the consumer cylinder affordable, that absorption was funded out of the same profit pool the Opposition wants to treat as excessive.
Sources also said the Rs 77,821 crore combined profit of the OMCs for 2025-26 is a 3 to 4 per cent net margin on combined turnover in the order of Rs 20 lakh crore — the working margin any healthy commodity refiner at this scale produces.
While some critics are calling the combined profit a 130 per cent jump over 2024-25, terming it a “windfall during a crisis”, sources said this jump has an “artificially depressed base”.
In 2024-25, the OMC profit was Rs 33,602 crore, which is Rs 47,384 crore lower than 2023-24. The drop was caused by Rs 40,434 crore in under-recoveries for domestic LPG that year, which was absorbed by the oil companies. That amount has since been paid.
The current oil price hikes – roughly to the tune of Rs 8 per litre – have drawn massive criticism from the Opposition, which have not only questioned the timing of the hikes but also accused the oil firms of profiteering.
To Opposition questions on why retail prices of petrol and diesel been raised in 2026, sources pointed to the global price hike following the US war on Iran. Besides the supply chain disruption that is pushing up the prices, sources said there are also associated costs, including higher loading premiums, increased freight and insurance surcharges.
Even so, the Indian retail prices remain considerably lower than those in neighbouring countries. In Kathmandu (Nepal), petrol is Rs 136.47 per litre and diesel Rs 141.50 per litre. In Pakistan, petrol is Rs 139.17 per litre and diesel Rs 138.82 per litre as on May 23, sources said.
“The Indian retail price discipline is the single largest reason India’s macro inflation has stayed where it is,” sources said.
About what the government had done to shield consumers from this price spike, sources said the government had cut excise duty on petrol and diesel by Rs 10 per litre on March 27, an early intervention taken within four weeks of the strikes on Iran.
It comes alongside earlier major excise cuts by the NDA government — Rs 5 per litre on petrol and Rs 10 per litre on diesel in November 2021; Rs 8 per litre on petrol and Rs 6 per litre on diesel in May 2022.
Together, these cuts add up to Rs 23 per litre on petrol and Rs 26 per litre on diesel.
The government has also continued the Rs 550 cap on the domestic LPG cylinders through 2024-25. The Rs 40,434 crore deficit was absorbed by the OMCs, which have since been compensated. ATF prices have also been managed within a band to protect domestic aviation.
