OMC Earnings Face Pressure Due to Q1FY27 Under-Recoveries
Oil Marketing Companies (OMCs) in India are bracing for a challenging fiscal period as significant under-recoveries are expected to squeeze profitability in the coming quarters. While recent drops in Brent crude prices have offered some temporary relief, structural headwinds and regulatory risks continue to cloud the outlook for the sector.
The Impact of Under-Recoveries in Q1FY27
According to a recent research report by domestic brokerage firm Prabhudas Lilladher (PL), the profitability of OMCs is expected to face a sharp decline in the first quarter of FY27. The report highlights significant under-recoveries that are set to weigh heavily on margins. Specifically, the brokerage expects under-recoveries of ₹7/ltr for Motor Spirit (MS) and ₹10/ltr for High-Speed Diesel (HSD). These projections account for a ₹10/ltr excise duty cut and a capping of cracks at USD 10/bbl for MS and USD 15/bbl for HSD.
LPG remains a primary area of concern for the industry. Losses in the LPG segment are estimated to reach approximately ₹500/cylinder in Q1FY27. This follows a period of extreme volatility where LPG under-recoveries climbed from roughly ₹170/cylinder in April 2026 to between ₹610–₹670/cylinder in May 2026. Furthermore, Saudi CP prices for Q1FY27 are projected to surge by 47% quarter-on-quarter, driven by supply constraints resulting from West Asian disruptions.
The Excise Duty Rollback Risk
A significant overhang for OMCs is the potential rollback of the ₹10/ltr excise duty cut. This reduction was originally implemented as a crisis management measure rather than a permanent fiscal policy. With crude oil prices moderating and the government implementing retail price hikes, there is growing speculation that the government may begin withdrawing these benefits.
The fiscal implications for the government are substantial, with the excise cut currently resulting in a revenue impact of approximately ₹1,700 billion per year. While a total sudden reversal is unlikely, the brokerage anticipates that any rollback of these duty cuts will likely happen in a phased manner, creating persistent pressure on the earnings of oil marketers.
Crude Oil Volatility and Inventory Dynamics
Sentimen seputar minyak mentah mengalami sedikit kenaikan menyusul gencatan senjata AS-Iran, yang membantu Brent crude turun di bawah angka USD 80/bbl. Namun, perusahaan pialang memperingatkan bahwa ini bukanlah tren yang pasti. Meskipun dimulainya kembali ekspor minyak Iran dan normalisasi di Selat Hormuz dapat menekan harga lebih jauh, faktor sisi permintaan tetap kuat.
Laporan tersebut mencatat bahwa seiring stabilnya konflik global, negara-negara yang menggunakan Strategic Petroleum Reserves (SPR) mereka selama gangguan baru-baru ini diperkirakan akan mulai mengisi kembali stok mereka. Pembangunan kembali inventaris secara masif ini kemungkinan akan menciptakan permintaan tambahan, memberikan batas bawah bagi harga minyak mentah dan memastikan volatilitas pasar tetap tinggi, yang pada gilirannya membatasi penyusutan margin OMC.
Poin-Poin Penting
- Kerugian Signifikan Diperkirakan: OMC menghadapi estimasi kekurangan pemulihan (under-recoveries) sebesar ₹7/ltr untuk MS dan ₹10/ltr untuk HSD, di samping kerugian LPG masif hampir ₹500/tabung pada Q1FY27.
- Hambatan Regulasi: Potensi pembatalan bertahap atas pemotongan cukai sebesar ₹10/ltr tetap menjadi faktor risiko utama bagi pendapatan jangka panjang sektor ini.
- Volatilitas Penawaran-Permintaan: Meskipun pelonggaran geopolitik dapat menurunkan harga, pengisian kembali inventaris global (pembangunan kembali SPR) diharapkan dapat mendukung harga minyak mentah dan menjaga volatilitas margin.