India Caps Refinery Margins to Combat Domestic Fuel Losses

In response to rising international oil prices due to the ongoing turmoil in West Asia, India has taken significant measures to address burgeoning domestic fuel sales losses. Recently, the nation has initiated capping refinery margins and has simultaneously imposed a Special Additional Excise Duty (SAED) on diesel and aviation turbine fuel (ATF) exports.

The capped refinery margins aim to mitigate the financial strain that oil marketing companies (OMCs) face as retail fuel prices remain unchanged despite market trends. Sources indicate that any refinery earnings surpassing USD 15 per barrel will be utilized to offset these retail losses, effectively acting as a discount on fuel sales to state-run marketing companies.

Further, due to unprecedented global petroleum price spikes, as of April 1, OMCs are enduring under-recoveries on petrol and diesel, amounting to Rs 24.40 and Rs 104.99 per litre, respectively. Analysts suggest that while the move will spread the financial burden across refineries, it could disproportionately affect independent refiners with limited downstream marketing capabilities.