Every major crisis India has faced in recent years, from devastating floods and the Covid-19 pandemic to the latest conflict in Middle East that disrupted global oil markets, has reinforced the strategic importance of the country’s state-run oil companies, which have ensured uninterrupted fuel supplies even as global energy markets came under severe stress.Public sector oil marketing companies (OMCs) have long faced criticism over government intervention in fuel pricing, modest returns and operational inefficiencies. Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) were put up for privatisation twice — first in 2002 before the process was halted by a Supreme Court ruling, and again in 2020, when the proposed sale was eventually abandoned after failing to attract enough bidders.Yet every national emergency has strengthened the case for retaining government control over companies that form the backbone of India’s energy security, analysts and industry officials said.
Natural disasters to Covid: Keeping fuel flowing
When unprecedented floods submerged Chennai in 2015, Indian Oil Corporation (IOC), BPCL and HPCL rerouted fuel supplies, restored flooded depots and ensured uninterrupted supplies to emergency services despite widespread disruption.The same network proved critical during the Covid-19 pandemic. While much of the country remained under lockdown, fuel stations stayed operational, refineries continued functioning with skeletal staff, LPG cylinders reached millions of households and aviation fuel supplies were maintained for relief and medical flights.Engineers remained stationed inside refineries for weeks to keep production running, while tanker drivers and LPG delivery personnel continued operations through curfews and containment zones.
Middle East conflict tests India’s fuel security
The recent conflict in Middle East once again highlighted the strategic role of state-run refiners.As the Iran war disrupted crude supply routes and raised concerns over shipments through the Strait of Hormuz, IOC, BPCL and HPCL quickly reconfigured refinery operations. They increased LPG production by diverting refinery streams away from petrochemicals, diversified crude sourcing, optimised refinery runs based on available feedstock and coordinated fuel supplies across the country to prevent local shortages.“The result was that no corner of the country went without fuel. Unlike several countries, including those in the neighbourhood, India did not see any rationing of fuel,” an industry official said, as quoted PTI.The companies also relied on India’s strategic petroleum reserves and commercial inventories while working closely with the government to reassure markets that adequate supplies would continue.
Shielding consumers from global oil price shocks
The three state-run OMCs also absorbed much of the spike in global crude prices instead of immediately passing it on to consumers.For more than two-and-a-half months, they absorbed an over 50 per cent increase in international oil prices before raising petrol and diesel prices by Rs 7.50 per litre each, LPG prices by Rs 89 per cylinder and CNG prices by Rs 6 per kg — significantly lower increases than those witnessed in many major economies.The response reflected a long-established strategy of absorbing global shocks first and protecting consumers for as long as possible.
That strategy came at a cost
Even as IOC, BPCL and HPCL await full government compensation for selling subsidised cooking gas during 2025-26, they chose to keep petrol and diesel prices unchanged through more than three months of turmoil in Middle East, sacrificing earnings to cushion consumers.According to Crisil Ratings, the three public-sector fuel retailers are estimated to have incurred net under-recoveries of Rs 40,000-45,000 crore between March and May, after accounting for inventory gains — almost equivalent to their combined annual profits.Private retailers, however, responded differently. Companies such as Nayara Energy and Shell passed on higher costs more quickly by increasing pump prices by a steeper margin during the same period, industry officials said.
Why privatisation remains a difficult decision
A similar contrast emerged during the Covid-19 pandemic.As fuel marketing became commercially unviable, several private retailers displayed “no stock” signs at their outlets. State-run OMCs continued uninterrupted supplies, with the government invoking emergency provisions to ensure private outlets also received fuel, albeit at prices higher than those charged by public-sector retailers.Industry officials said India could have faced a far more difficult situation had BPCL or HPCL– which together account for roughly half of the country’s fuel retail network and around one-fourth of fuel sales each–been privatised.Unlike state-owned companies, private owners would have had little obligation to sell petrol, diesel or LPG below market prices or absorb prolonged under-recoveries in the national interest.“What that would have meant for a country as dependent on imported oil as India can only be imagined,” one official told news agency PTI, arguing that public ownership has enabled these companies to prioritise energy security over profitability during successive crises.
Public sector OMCs remain India’s energy backbone
Unlike purely commercial energy companies, IOC, BPCL and HPCL are expected to fulfil a strategic national mandate alongside generating profits.Together they account for nearly 90 per cent of India’s fuel retail network, operate most of the country’s refining capacity, maintain an extensive pipeline network and supply petroleum products across the country, including remote regions where private operators often have little commercial incentive to operate.Their nationwide presence has enabled governments to swiftly implement emergency measures — from distributing subsidised LPG cylinders during the pandemic and ensuring diesel supplies during natural disasters to managing inventories during periods of global supply disruptions.
Strategic value outweighs commercial considerations
That strategic role has repeatedly complicated attempts to privatise the companies.The Vajpayee government’s attempt to privatise BPCL and HPCL in the early 2000s was halted after the Supreme Court ruled that parliamentary approval was required because the companies had been nationalised through legislation.Nearly two decades later, the Narendra Modi government revived plans to sell its majority stake in BPCL as part of a wider asset monetisation programme, but the process was shelved after prospective bidders withdrew amid market uncertainties.Successive governments have encouraged private participation in fuel retailing but have stopped short of relinquishing control over public-sector OMCs that remain central to India’s energy security architecture.With India importing more than 88 per cent of its crude oil requirement and geopolitical disruptions becoming increasingly frequent, policymakers now view energy resilience as a strategic capability rather than merely a commercial business.For investors, government ownership can sometimes weigh on profitability because of policy interventions. For policymakers, however, it provides something markets alone cannot easily replicate — an integrated nationwide energy network that can be mobilised at short notice when crises strike.Time and again, India’s public sector oil companies have demonstrated that while their commercial performance may invite debate, their strategic importance becomes most visible when the country’s energy security comes under pressure, analysts said.
