Geopolitical turmoil, softer oil prices to lift oil firms' FY26 dividends

Lower crude prices, strong refining and marketing margins may help state oil companies double dividends to the government in FY26 despite geopolitical risks

Volatile geopolitics and low fuel prices may boost contributions by Indian state oil companies to the exchequer in 2025-26 (FY26), even as they remain in the crosshairs of US President Donald Trump for importing crude oil from Russia, according to the industry data, company officials and analysts. 

India’s oil-marketing companies (OMCs) may double dividends to the government, fuelled by a perfect storm in refining and retail — low crude oil prices, discounted supplies of Russian oil, elevated pump prices of diesel and petrol, and a steep fall in revenue losses on LPG, industry officials said. 

Payouts to investors from the three OMCs may surge to ₹22,000-₹23,000 crore in FY26, with state-run Indian Oil Corporation (IOC), the country’s biggest processor of crude, contributing a large share, interviews and the analyst data showed. The government, as the largest shareholder, is the biggest beneficiary. (HPCL is controlled by ONGC and pays its dividends to the parent). 

Higher dividends are the result of strong profit growth for OMCs in FY26, which, in turn, is derived from robust refining and marketing margins, industry officials said. 

“For OMCs, the marketing margin is very strong. So, their profitability would be significantly better this year,” said Prashant Vasisht, senior vice-president at ratings agency Icra, a Moody’s affiliate. “Going by that logic, dividends would also grow.” 

Vasisht said the current differential between pre-tax retail prices in India and international prices for petrol is ₹10 per litre and ₹4 per litre for diesel, reflecting huge gains for OMCs at the pump. 

IOC’s dividends may triple in FY26 from a year earlier, while Bharat Petroleum Corporation Limited (BPCL) may double payouts, a Mumbai-based analyst said. BPCL has already declared ₹17.5 per share in dividends as of December. IOC and BPCL were not available for comment. 

BPCL boosted net profits by 62 per cent year-on-year (Y-o-Y) in Q3FY26 to ₹7,500 crore, with average GRMs more than doubling to $13.4 per barrel during the October-December quarter. 

Hindustan Petroleum’s profit after tax grew by 35 per cent Y-o-Y to ₹41 billion in the latest quarter, with average GRMs increasing by 48 per cent to $8.9 per barrel. MRPL, an ONGC unit, nearly dou-bled its GRM in Q3FY26 to $12 per barrel from $6.8 per barrel a year earlier and $9.1 per barrel in the previous quarter, according to DAM Capital. 

Indian Oil is yet to declare its results, but analysts expect double-digit GRMs, with product cracks — or the profits derived from processing crude oil into fuels — turning out to be among the best in recent times. 

Healthy profits 

Overall dividend payouts from OMCs, ONGC, Oil India and GAIL slumped by over a third in FY25 from FY24, after FY24 dividends had doubled from FY23, according to industry data. One of the primary drivers of record FY24 payouts was super-strong diesel cracks of up to $32 per barrel, which plunged the following financial year. Profits from making diesel have since rebounded to as much as $27 per barrel since September. 

There are three reasons powering OMC profits. First, the four-year-old Russia-Ukraine war has kept the tap open for discounted oil. Second, product cracks, or the profits derived from processing crude oil into fuels such as petrol, diesel and aviation fuel, have strengthened since mid-2025 because of permanent planned refinery closures in western countries and the ongoing Ukraine war. (Cracks typically depend on crude price levels, refining efficiencies, refinery gate prices and transport costs.) 

Global cracks improved after Ukrainian drones damaged secondary processing units used to make fuels at key Russian refineries since last August, maritime intelligence agency Kpler said in a note. Russia has the third-largest refining capacity globally after China and the US and is a large exporter of diesel. Reduced supplies of middle distillates such as diesel improved cracks, analysts said, leading to stronger GRMs for Indian refiners. India’s largest petroleum product is diesel. 

While GRMs have surged in recent months, marketing margins — the profits made from selling fuels to motorists at the pump — have risen even more. Margins rose fourfold from average levels of ₹2-2.50 per litre seen in the past, two refining officials said. 

Marketing margins are currently at ₹7 per litre, and Indian GRMs are at $7.8 per barrel, according to a report by DAM Capital. 

However, OMCs continue to charge motorists fuel prices consistent with crude oil averaging $80 per barrel, two analysts said. 

“In April, crude prices declined to $65 per barrel from $74 per barrel in March  and have since remained in the $60-65 range,” Vasisht said. The Indian crude oil basket averaged $62 per barrel this month, the lowest since February 2021, oil ministry data showed. Rates averaged around $44 per barrel in FY21 and have since logged $79, $93, $82 and $78 per barrel in subsequent fiscals. FY26, until January, has averaged $60 per barrel. 

OMCs have also improved cash flows from lower under-recoveries on LPG, or revenue losses from selling the fuel below cost.

A Mumbai-based analyst and a senior official from a state refiner said lower crude prices and a corresponding decrease in LPG contract prices by Saudi Arabia in recent months have sharply reduced under-recoveries this fiscal.  

Early last year, under-recoveries were as high as ₹200 per cylinder, which has now fallen to about ₹40-50, Vasisht said. 

LPG under-recoveries for OMCs, net of reimbursements, are estimated to decline to more than halve to around ₹20,000 crore in FY26 from over ₹40,000 crore in FY25, according to analysts’ estimates. 

However, FY27 may see Singapore GRMs averaging slightly lower at $4-5 per barrel, Vasisht said. Marketing margins may also have peaked, which in turn could crimp dividends next financial year, the Mumbai-based analyst said.