Fuel retailers to face high margin pressure, cash-flow volatility: Moody's Ratings

12 Mar 2026 Evaluate

At a time when the West Asia conflict is spiking global oil and gas prices, Moody’s Ratings has noted that state-owned Oil Marketing Companies (OMCs) - Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) - will face high volatility in margins and cash flow as they absorb the impact of elevated global energy prices. It pointed out that domestic retail prices of fuels have remained largely steady since April 2022, despite swings in global oil and gas prices and the country's high dependence on imports, reflecting the government's involvement in fuel pricing.

It highlighted that these three companies operate around 90% of retail fuel outlets in India, and the country high dependency on imported oil and gas exposes the OMCs' cost base directly to movements in global energy prices. During FY 2024-25, India imported 88% and 51% of its oil and gas requirements. It added that the country is stands out among the large Asian economies that rely on crude from West Asia, and holds crude reserves covering 74 days of net oil imports.

However, the Moody’s has expected that OMCs’ earnings to recover as prices subsequently normalise. Further, the US government has granted a 30-day waiver for India to buy Russian oil stranded at sea to ease global crude supply constraints caused by the closure of the Strait of Hormuz. Besides, the government has directed all refiners in the country to maximise LPG output to ensure continued supply to domestic consumers, and raised LPG prices by Rs 60 per 14.2-kilogram cylinder on March 7, reflecting higher international prices.

Moreover, Moody’s noted OMCs’ losses will accumulate from selling LPG domestically below market prices, but they could be compensated later by the government. In August 2025, the government approved Rs 30,000 crore in total compensation for the three OMCs, which will be disbursed in 12 equal monthly instalments starting November 2025. The OMCs had incurred losses totalling close to Rs 40,000 crore in fiscal 2024-25.

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