State Bank of India Warns Currency Depreciation May Hurt Oil Marketing Companies

According to the report, it is essential to prevent the rupee from depreciating along with the price increase. Only then can the country's rising energy bills be curbed and the economy protected from rising energy costs. According to SBI, OMCs are currently incurring losses of approximately ₹1,000 crore per day, which translates to approximately ₹3.6 lakh crore on an annual basis.

This ₹3 increase is expected to provide these companies with a relief of approximately ₹52,500 crore in the financial year 2026-27, which represents only 15% of their total expected losses. This relief will be available to oil companies only if the rupee remains stable at an estimated annual average of ₹94 per dollar.

However, if the rupee weakens by just ₹2 further to ₹96, the entire benefit of the ₹3 increase will be nullified. As for crude oil prices, there is no sign of significant relief. According to the International Energy Agency (IEA), prices will remain high due to declining production.

Even assuming that crude supplies through the Strait of Hormuz gradually return to normal starting in June, global oil supply will still decline by an average of 3.9 million barrels per day in 2026, and total production will fall to 102 million barrels per day. Although global demand will also decline due to the war, the gap between demand and supply will persist.

The report also states that the increase in petroleum product prices will immediately increase the Consumer Price Index by 15-20 basis points. The government has already reduced excise duty on petrol and diesel by ₹10, resulting in a revenue loss of ₹1.1 lakh crore for the central government.

However, if crude prices continue to rise in the international market, the government may further reduce excise duty. According to SBI, if excise duty is reduced to zero, the central government's revenue could decline by an additional ₹1.9 lakh crore (0.5% of GDP), while states will suffer a revenue loss of ₹80,000 crore.