India's crude basket reaches 15-year peak, tightening oil firm margins and fiscal space

India's crude oil basket hit roughly $120 per barrel in October, the strongest average since March 2012, intensifying strain on oil marketing companies (OMCs) that are already posting under-recoveries despite recent retail price increases. The surge raises concerns about a broader fiscal impact, as higher import bills could widen one outlet-account deficit and limit the government's capacity to fund fuel and fertiliser subsidies, the latter potentially exceeding its FY27 budget estimate by over 76 per cent.

Wholesale price index inflation rose to 11.4 per cent in September, and economists expect retail inflation to stay around 5-6 per cent in the near term. The Reserve Bank of India has lifted its CPI inflation projection to 5.2 per cent and raised the policy repo rate to 5.5 per cent. OMCs such as Hindustan Petroleum Corporation face the greatest margin pressure due to a low refining-to-marketing ratio, while the government’s recent excise duty cut on petrol and diesel has reduced revenue collections by about 23 per cent year-on-year. Continued high crude prices could force further retail fuel price adjustments, complicating fiscal calculations amid upcoming state elections.