The Centre has identified a concerning trend of industrial users diverting discounted retail fuel from their entitled industrial procurement to capture protected prices. According to reports from Business Standard, the Defence Minister Rajnath Singh-led Informal Group of Ministers (IGoM) on West Asia noted that industrial users are substituting their entitled industrial procurement with retail purchases to capture the protected price, alongside instances of black marketing by certain dealers. The Ministry of Petroleum and Natural Gas, Oil Marketing Companies (OMCs) and state governments have intensified field enforcement, with industry associations being engaged to remind members of expected conduct. As per the government statement, "Industrial consumers who divert their purchases from the industrial channel to the retail pump capture this cushion at the cost of the ordinary citizen. They also concentrate demand at the pump in a way that produces local shortages where none would otherwise exist." The government emphasized that "this cushion is intended for the retail consumers: the households, the two-wheeler commuters, the farmers at the pump. It is not extended to industrial procurement, where pricing tracks international actuals as a matter of standing policy."
Public sector Oil Marketing Companies are bearing significant financial burden to protect retail consumers. As reported by Business Standard, during the present disruption, public sector OMCs have refrained from passing the full international price into retail, absorbing approximately ₹550 crore per day as losses. The government clarified that this pricing cushion is meant exclusively for retail consumers, while industrial and commercial diesel prices continue to track international rates under the existing pricing policy. The government stated that "under the direction of the government, and as a deliberate act of consumer protection during the ongoing West Asia disruption, the oil marketing companies have refrained from passing through the full international price into domestic retail sales." The issue figured prominently during the sixth meeting of the Informal Group of Ministers (IGoM) on West Asia chaired by Defence Minister Rajnath Singh at Kartavya Bhawan-2 in New Delhi on Wednesday (May 27, 2026).
The fuel price differential is creating significant market shifts as consumers seek cheaper alternatives. According to the government, country's privately-owned OMCs have observed an approximately 38% decline in sales of diesel in the ongoing month — from both retail and bulk consumers — owing to their higher prices. This has resulted in shifting demand to public-sector OMCs having comparatively lower prices. Similarly, PSU bulk consumer volumes have also declined approximately 29% as they migrate to retail outlets. For context, bulk and retail diesel have a price differential of about ₹40 per litre, making the cost difference substantial for industrial consumers. The government noted that "this volume is shifting entirely to PSU oil marketing retail outlets," highlighting the market migration pattern. The government assured that "there is no supply issue of any kind" and emphasized that "the country has more than adequate supplies of petrol and diesel to meet every domestic need, retail and industrial alike."
The government has taken a "serious view" of the fuel diversion situation and has intensified enforcement actions across multiple levels. As per the Oil Ministry statement, the government has requested States/UTs to form special squads and take strict action against malpractice of bulk consumers and hoarders taking supplies meant for retail consumers, black marketing, unauthorised stocking and diversion of petroleum products under relevant provisions of EC Act and Control orders issued thereunder. The Ministry emphasized that "it has been observed that private OMCs are experiencing a decline of approximately 38 per cent in diesel offtake during the current month, across both retail outlets and bulk customers due to higher rates fixed by them." The government stated that "the government, taking a serious view of above, has asked the industry associations to make their members aware of both the principle and the consequence of violations." This represents a significant escalation in enforcement measures to combat the concerning trend of industrial users capturing retail-intended fuel subsidies.
Despite the current challenges, India maintains robust energy security infrastructure. According to the Oil Ministry, India's refining capacity of 258.1 million tonnes across 22 refineries produced sufficient fuel to meet domestic consumption of 243.2 million tonnes in FY26, while exporting 61.5 million tonnes of petroleum products. The government emphasized that "there is no scarcity of any petroleum product. There is, in pockets, a pattern of arbitrage that is creating the appearance of one." As per PTI, Union Petroleum and Natural Gas Minister Hardeep Singh Puri has been in continuous coordination with public sector oil marketing companies (OMCs), state governments and industry bodies to ensure uninterrupted supply. The government stated that "India's refining strength, the disciplined operation of the Public Sector OMCs and the active coordination across Centre, states and industry constitute the working architecture of energy security during this period." The ministry urged citizens to rely on official communications and avoid rumours that confuse "arbitrage-driven distortions" with actual fuel shortages.
