Private Fuel Firms Surge as PSUs Hold Back on Price Cuts

• Private fuel firms are gaining ground as PSUs freeze pump prices
• Reliance and Nayara undercut PSUs by up to Rs. 3 per litre at the pump
• Indian Oil regained bulk diesel share amid tax cuts and fierce price wars

Private fuel companies Reliance Industries and Nayara Energy, backed by Rosneft, are piling on a growing market distortion as state-run oil companies remain immobile in the face of global fuel prices dropping significantly, as they announce they will leave domestic pump prices unchanged. 

Crude oil prices have fallen by 20 percent over the last year, meaning petrol and diesel prices are down by 14 percent and 17 percent, respectively, in international markets. In India, consumers have seen no reduction in pump price due to fuel prices remaining unchanged, creating extraordinarily high margins to all fuel retailers. 

While public sector undertakings (PSUs) are using these profits to offset losses from their LPG business, private retailers are cutting petrol and diesel domestic pump prices for up to Rs. 3 a litre cheaper than PSU pumps, and it is slowly eroding the market share of public sector undertakings, say industry sources. 

The private sector's share of diesel sales rose to 11.5 percent in April and May from 9.6 percent a year before, while petrol gained to 10 percent from 9 percent.

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The cut in prices reflects how much flexibility exists in the market when forces can operate freely. Notably, the state-owned Indian Oil Corporation, in this regard, almost recaptured some of the bulk market segment lost to private players since the ‘Chronicles of GST’ have reduced the GST rate for bulk diesel from 18 to 12 percent. 

PSUs are pursuing a balanced budget on this account, and in 2024-25, Indian Oil, Hindustan Petroleum, and Bharat Petroleum collectively reported a loss of Rs. 41,266 crore on subsidized price sales of LPG, with no compensation through the government. Private operators free from costs and the market legacy of LPG can enjoy the price advantage and are attracting players into the distribution and retail of fuel.