Rating agency ICRA has estimated that under-recoveries on domestic LPG sales may reach around ₹80,000 crore in FY2027, driven by elevated global prices and supply disruptions linked to the West Asia conflict. At the same time, stable retail fuel prices have constrained margins for oil marketing companies despite high crude costs. According to ICRA, at crude levels of $120–125 per barrel, petrol margins are estimated at negative ₹14 per litre, while diesel margins could be around negative ₹18 per litre. The agency notes that stable pump prices are impacting profitability across the sector, highlighting the pressure on oil marketing companies.
Rating agency ICRA has warned that the profitability of key downstream sectors including oil marketing, fertiliser, chemical and City Gas Distribution (CGD) is likely to be impacted in FY2027 due to raw material cost pressures and supply constraints amid the ongoing West Asia conflict. According to the report, the moderation in profitability is expected to result in moderation in the credit profile for several sectors, highlighting the significant financial impact on these industries. The ongoing global energy disruption is creating widespread cost pressures across industries, with LPG losses, rising subsidies and margin compression expected to shape the outlook for multiple sectors in FY2027.
The disruption in the Strait of Hormuz (SoH) has impacted 20% of global oil and LNG trade and a sizeable share of supplies of various fertilisers and chemicals, constraining the availability of these products. As reported by ICRA, this has raised prices across commodities including crude oil, natural gas, chemicals, and fertiliser, exerting cost pressures in downstream industries. Although Indian refiners have increased LPG production and sourced additional cargoes from the US and Australia, elevated international prices continue to keep losses high. The impact extends beyond oil marketing, affecting fertilisers, chemicals, and city gas distribution due to higher feedstock costs.
The fertiliser sector faces significant cost pressures driven by a rise in sulphur and ammonia prices, which in turn feed into other raw materials and finished products. According to ICRA, the pooled gas price for urea has increased to about $19 per mmbtu in April 2026 from $13 before the crisis. ICRA expects profitability of phosphatic and potassium fertiliser players to decline due to limited subsidy revisions, with only partial pass-through of costs, except for di-ammonium phosphate. Subsidy requirements for FY2027 are projected at ₹2.05–2.25 trillion, compared to the budgeted ₹1.71 trillion. In chemicals, higher raw material and fuel costs have lifted prices, with short-term demand supported by stockpiling, though consumption may ease as inventories stabilise.
The City Gas Distribution (CGD) sector continues to face rising cost pressures amid currency depreciation and rising gas prices. As reported by ICRA, in the city gas distribution segment, compressed natural gas margins are under pressure due to rising gas prices and currency depreciation. However, piped natural gas for domestic use is expected to remain stable, supported by preferential allocation of administered price mechanism gas. Girishkumar Kadam from ICRA noted that rising input costs may eventually be passed on to consumers, with demand moderation possible in the near term. The agency also highlighted a sharp increase in helium prices due to supply disruptions, with the US emerging as an alternative source, though supply ramp-up remains uncertain.
