Indian state-run fuel retailers have, for the first time since deregulation, introduced steep discounts on the prices they pay refineries for key petroleum products, in an effort to cushion the heavy losses caused by a continued freeze on retail fuel prices, according to people familiar with the development.

The move, implemented on 16 March, significantly reduces the refinery transfer price (RTP) for petrol, diesel, aviation turbine fuel (ATF) and kerosene, cutting the rates by as much as ₹60 per litre compared to import costs. The decision comes at a time when international crude prices have surged from around USD 70 per barrel ahead of the Middle East conflict to above USD 100, while pump prices in India have remained unchanged since April 2022.

“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,” the Ministry of Petroleum and Natural Gas posted on X on April 1.

Officials say the discounted RTP mechanism is intended to spread the financial strain across the refining and marketing value chain, though industry analysts warn it could deepen the pressure on independent refiners.

Heavy reductions in refinery transfer prices

For the second half of March, OMCs imposed a discount of ₹22,342 per kilolitre on diesel, lowering the RTP from ₹85,349 per kl to ₹63,007 per kl.

In the first fortnight of April, the discount widened dramatically to ₹60,239 per kl, slashing the diesel RTP from ₹146,243 per kl to ₹86,004 per kl.

Similar cuts have been applied to other fuels:

  • ATF RTP reduced from ₹127,486 per kl to ₹76,923 per kl after a ₹50,564 per kl discount.
  • Kerosene RTP lowered from ₹123,845 per kl to ₹77,534 per kl following a ₹46,311 per kl markdown.

OMCs have not commented on the pricing revisions.

Standalone refiners to bear the brunt

Integrated public-sector companies, which have both refining and retail operations, may be able to offset some of their losses internally. However, standalone refineries, whose earnings depend heavily on market-linked RTP. are expected to face severe margin erosion.

Firms with minimal retail presence are likely to be most affected, including MRPL, CPCL and HMEL, which rely on selling the bulk of their production to state-run OMCs.

The changes could also hit private refiners such as Nayara Energy and Reliance Industries if similar discounts are extended to them. Both players sell most of their domestic fuel output to OMCs, which control 90 per cent of India’s retail fuel network.

Departure from long-standing pricing norms

India traditionally priced petrol and diesel using import parity pricing (IPP), later replaced by trade parity pricing (TPP), which blends 80 per cent IPP with 20 per cent export parity. This framework historically protected refinery margins, especially for companies without downstream marketing operations.

Although petrol and diesel were deregulated in 2010 and 2014, their retail prices have not followed market movements in recent years. With no government compensation for auto fuel losses, unlike LPG, OMCs have had to absorb the entire impact of cost volatility.

Sources say the decision to freeze RTP is aimed at sharing the burden of soaring crude costs across the industry. However, analysts caution that the move could unsettle the pricing confidence of standalone and private refiners, who count on market-determined RTP for stable revenue.With no clear end to geopolitical tensions driving global oil prices, refiners and marketers alike may continue to face pressure in the weeks ahead.

(PTI)