Oil Marketing Companies See Stock Gains Amid Policy Adjustments

Market Performance

Shares of key oil marketing companies (OMCs) rose significantly on April 8, 2025. Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), and Indian Oil Corporation Ltd (IOCL) all registered gains during the trading session.

• BPCL shares increased by 2.8%, trading at ₹281.25 on the NSE.
• HPCL stock rose by 4%, reaching ₹363.
• IOCL shares climbed 1.7% to ₹130.3.

Government Policy and Sector Development

The surge in OMC stocks followed two key decisions made by the Indian government:

1. An increase of ₹50 per cylinder in the price of domestic LPG.

2. A hike of ₹2 per litre in the special excise duty on petrol and diesel.

These moves aim to manage ongoing financial losses in the sector while increasing government revenue.

Company Details and Financial Outlook

Revenue and Compensation Measures

The ₹50 hike in domestic LPG prices is projected to help oil companies recover approximately ₹9,000 crore in 2025–26. Additionally, the government is preparing to seek Cabinet approval for a ₹32,000 crore compensation package intended to support OMCs dealing with under-recoveries.

Impact of Crude Oil Trends

Global crude oil prices are reportedly declining to $60–$65 per barrel, compared to the current inventory cost, which averages $75 per barrel. This reduction in input costs is expected to enhance the profit margins of OMCs, providing them with the capacity to absorb the ₹2 excise duty increase.

Government Revenue and LPG Losses

The excise duty hike is estimated to contribute ₹33,000 crore annually to the government's revenue. Meanwhile, the domestic LPG price hike is expected to reduce overall LPG-related losses by 23%, against an estimated total loss of ₹41,300 crore.

Summary

Oil marketing companies witnessed a stock market rally as the Indian government introduced policy measures to stabilise their financial performance. The combination of higher excise duties and LPG prices, alongside softening crude oil rates, is expected to support revenue recovery and improve margins across the sector.