OMCs sulk for more

Indian Oil Corporation spurted up 2%, BPCL rose 2.5% and HPCL rose over 2% but is currently trading in the negative; IOC and BPCL too are just about holding onto the green.

The initial positive reaction was on news of Indian government’s Rs. 30,000 crore capital infusion/ support package for Oil Marketing Companies (OMCs) but soon a reality check came in and prices dropped.

The market is not too happy with this as Rs.30,000 crore is viewed as inadequate support

compared to what OMCs, especially IOC, BPCL, and HPCL, actually need to offset their past under-recoveries and fund upcoming capex.

In FY23 and parts of FY24, OMCs absorbed huge under-recoveries (especially on diesel and LPG), with some estimates putting the combined hit at Rs.1.1 to 1.3 lakh crore across IOC, BPCL, and HPCL. And now this Rs 30,000 crore spread across three companies works out to Rs.10,000 crore each — barely covering a fraction of those past losses.

IOC alone has a capex plan exceeding Rs.30,000 crore annually for refineries, petrochemicals, pipelines, and renewables. IOC’s net debt was at over Rs.1.1 lakh crore in FY25 thus a smaller-than-expected support package means no significant debt reduction.

If the government maintains retail price caps for political reasons, future under-recoveries could again eat into margins, it makes Rs.30,000 crore look like a temporary patch, not a structural fix.

Before the announcement, some analysts expected a larger relief package in the Rs.45,000–Rs.60,000 crore range. The lower-than-expected figure fuels concern that OMCs will need to rely more on borrowing to meet both operational and expansion needs. This sentiment is reflected in muted stock moves or slight declines post-announcement.