Cheap Russian Oil, Yet Petrol Pumps Stay Costly
India’s Russian oil imports tell a striking story in numbers. Over the past two years, India has been importing crude oil at discounts ranging from 25% to 50%, amounting to US$5–USUS$30 per barrel below global prices. Yet petrol prices remain near Rs95 per litre and diesel at about Rs88 per litre. During this same period, state-owned oil marketing companies (OMCs) have reported a huge jump in combined profits, while the Union and States continue to rake in nearly Rs4.7 lakh crore annually in fuel taxes. The Indian consumer, however, has seen no reduction in fuel prices.
The OMC Windfall
In FY23–24, Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) posted combined profits of Rs86,000 crore, compared to just Rs3,400 crore the previous year. Indian Oil’s profit alone surged from Rs8,242 crore to Rs39,619 crore, a jump of 381%. Bharat Petroleum saw an unprecedented rise from Rs1,870 crore to Rs26,674 crore—a 1,326% increase—while Hindustan Petroleum swung from a loss of Rs8,974 crore to a profit of Rs14,694 crore.
Private refiners extracted even larger gains. Reliance Industries Ltd (RIL), importing the largest share of discounted Russian crude, recorded refining margins exceeding US$12.5 per barrel, while Rosneft-backed Nayara Energy reported margins of US$15.2 per barrel. These margins, multiplied over millions of barrels daily, translated into tens of thousands of crores in windfall profits.
The Government’s Take: Taxes that Bite
The Indian government collects Rs2.7 lakh crore annually from fuel excise duties, with current levies standing at Rs13 per litre of petrol and Rs10 per litre of diesel. In April 2025, excise was hiked by Rs2 per litre, generating an additional Rs32,000 crore in revenue.
State governments are no less dependent on fuel taxation. Their annual value-added tax (VAT) collections on fuel are around Rs2 lakh crore, as VAT—charged ad valorem—automatically rises when base prices stay high. On average, 30% of every litre of petrol and 26% of diesel goes to state VAT, making fuel one of the most lucrative revenue streams for states. Together, taxes account for nearly 46% of the price of petrol and 42% of diesel.
Marketing Margins: The Hidden Layer
Beyond taxes, OMCs have expanded their marketing margins dramatically. Profits on fuel sales alone have reached Rs15 per litre for petrol and Rs12 per litre for diesel, representing one of the largest hidden components in the retail price structure. Each US$1 per barrel drop in global crude prices boosts OMC margins by about Rs0.55 per litre, yet this gain is retained entirely by the companies.
Exports: Profits Over Pumps
Private refiners such as Reliance Industries and Nayara Energy have converted discounted Russian crude into an export bonanza. Petroleum product exports hit US$60bn (billion) in FY24–25, with US$15bn worth shipped to the European Union (EU) alone, even as European buyers embargoed Russian oil. By refining discounted crude and selling high-margin products abroad, these refiners have prioritised exports over passing savings to domestic consumers.
Why the Consumer Pays the Price
Despite oil being deregulated on paper, retail prices are effectively administered. Governments prefer high prices to secure steady tax revenues, while OMCs justify their margins by citing past under-recoveries on liquified petroleum gas (LPG) subsidies. The result is a structural lock-in: low-cost crude imports benefit companies and governments while consumers bear persistently high pump prices.
Trump’s Taunt and the Unasked Question
US president Donald Trump’s rhetoric was inaccurate in framing India’s role, but it indirectly underscores a domestic question: if cheap Russian oil is in ‘India’s interest’, why does the Indian consumer not share in the benefit? The numbers point to an uncomfortable truth: the gains are concentrated in corporate balance sheets and government revenue streams, not household budgets.
A Call for Cheaper Oil
The Russian crude windfall should be more than a profit cushion for OMCs and a fiscal lifeline for governments. With oil marketing companies reporting profits in excess of Rs86,000 crore, central excise revenue touching Rs2.7 lakh crore, and state VAT adding another Rs2 lakh crore, it is clear that consumers have been excluded from the very benefits they were promised.
It is time to demand that oil marketing companies—especially private refiners—shave their swollen margins and that governments revisit punitive fuel taxes. Cheap oil must no longer remain locked away in corporate profits and public treasuries. It must translate into lower pump prices and genuine relief for India’s consumers, who have long borne the brunt of high fuel costs despite an era of discounted crude.
(Karan Bir Singh (KBS) Sidhu is a retired IAS officer and former Special Chief Secretary, Government of Punjab. He holds a Master’s degree in Economics from the University of Manchester, UK. He writes at the intersection of global trade negotiations, Trump-era tariff shocks, and contemporary geopolitics.)
1) At no point of time were discounts as high as 25-50%... pure guesswork of an ill informed writer. Who gives that much discount? Does this writer know anything about oil industry at all? A casual research of global articles on how Russian crude is being priced over the last 4 years would tell how the discounts have changed. Discounts were very briefly just above 10% when the war started and EU put a price cap, but it soon went down to under 10% and in the last 1 year, it has already shrunk to only $2-3 per barrel, which is less than 5%.
2) Govt of India levied export taxes on refined fuels immediately after Russian oil started flowing into India to take away the excess refining gains made by refiners as taxes. These export taxes were adjusted periodically based on the changing discount and market movements to ensure taxes went up in direct linkage with these discounts. So bulk of the gains went to GOI and no one else.
3) Comparing absolute profits makes no sense in a refining industry as any equity analyst will tell you, but who cares about facts and analysis when you are an IAS. If you want to really see the impact of the Russian discount on profits of Indian refiners, then study the delta between the global industry refining margins for the same complexity of each refinery (measured by Nelson Complexity Index) for each period before and after the war and see how the delta has changed. If the base refining margin itself is changing for the entire global industry (whether up or down), that cannot be combined in the aggregate to label everything as Russian gains. Total nonsense.
This is the problem with India.... every arm chair critic is supposedly an "expert" on anything and everything
To reduce this dependency it is essential that India shifts to renewable energy based vehicles - OMCs should hence invest extremely aggressively in setting up solar and wind power projects - so that by 2040 at least 75% of vehicles are on renewable power. To support this energy transition, the Government must offer 5 yr interest free loans to match the investment made by OMCs