India Caps Refinery Margins To Cushion Fuel Losses

OMCs fixed discounts on the refinery transfer price (RTP) to pay refineries less than import parity cost and lower internal transfer rates. For the second half of March a discount of Rs 22,342 per kilolitre (kl), or Rs 22.34 per litre, reduced diesel RTP from Rs 85,349 per kl to Rs 63,007 per kl. The discount mechanism is intended to reduce the import-parity component of pricing.

In the first fortnight of April a discount of Rs 60,239 per kl lowered diesel RTP from Rs 146,243 per kl to Rs 86,004 per kl. Aviation turbine fuel RTP fell to Rs 76,923 per kl from Rs 127,486 per kl after a discount of Rs 50,564 per kl, while kerosene RTP was set at Rs 77,534 per kl following a discount of Rs 46,311 per kl from Rs 123,845 per kl. These adjustments have sharply narrowed transfer rates for major auto fuels.

Petrol and diesel were historically priced on an import parity basis and refinery transfers used import parity pricing until June 2006. The government then adopted trade parity pricing, assigning 80 per cent weight to import parity and 20 per cent to export parity, a change that protected refinery margins, especially for standalone refiners without marketing arms.

Prices at the pump have been effectively frozen since April 2022 and marketing companies have absorbed losses when crude costs rose, creating under-recoveries. The ministry reported under-recoveries of Rs 24.40 per litre on petrol and Rs 104.99 per litre on diesel as on 01.04.2026, and sources said the discount on RTP will distribute the financial burden across the refining ecosystem while potentially hitting independent refiners hardest.