Date: 2026-05-27Category: Press ReleaseState: Union GovernmentCountry: India
India’s refining surplus capacity ensures full domestic supply of Petrol and Diesel; Government calls for discipline in the use of retail fuel channels
**Executive Summary**
This report outlines the Government of India’s assurance of adequate petrol and diesel supplies, dismissing rumors of scarcity as localized issues caused by price arbitrage. As of May 27, 2026, the government has directed Public Sector Oil Marketing Companies (PSU OMCs) to continue absorbing losses to shield retail consumers while ordering States and Union Territories to form special squads to prevent fuel diversion. Industry bodies are tasked with ensuring members adhere to designated procurement channels to maintain domestic supply stability.
**Key Points / Main Content**
**Refining Capacity and Supply Stability**
* India maintains a refining capacity of 258.1 million tonnes per annum across 22 refineries, making it the world’s fourth-largest refiner.
* For FY 2025-26, domestic consumption stood at 243.2 million tonnes, while exports reached 61.5 million tonnes, indicating a significant surplus.
* The Ministry confirms there is no actual scarcity of petroleum products; current issues are attributed to a pattern of arbitrage in specific pockets.
**Pricing and Consumer Protection**
* To protect retail consumers from West Asia disruptions, PSU OMCs are absorbing losses of approximately ₹550 crore per day.
* Retail price cushions are intended specifically for households, two-wheeler commuters, and farmers.
* Industrial procurement pricing remains aligned with international actuals; however, industrial consumers are improperly migrating to retail channels to capture the price cushion.
**Market Shifts and Arbitrage Challenges**
* Private OMCs have experienced a 38% decline in High-Speed Diesel (HSD) offtake this month as customers shift to PSU retail outlets due to lower rates.
* PSU bulk customer volumes have declined by approximately 29%, with these buyers also migrating to retail pumps.
* This concentrated demand at retail pumps is creating artificial local shortages that would not otherwise exist.
**Regulatory and Enforcement Measures**
* The Government has invoked the Essential Commodities (EC) Act to tackle malpractices.
* States and UTs are requested to take strict action against black marketing, unauthorized stocking, and the diversion of retail supplies.
* Industry associations (FICCI and CII) are required to sensitize members regarding the legal consequences of violating procurement principles.
**Impact Analysis**
**PSU Oil Marketing Companies (OMCs)**
**Impact**
They are currently bearing a financial burden of ₹550 crore daily to stabilize retail prices and are facing a surge in demand as customers migrate from private and bulk channels.
**Action Required**
Maintain continuous coordination with the Ministry and State Governments to ensure uninterrupted supply despite increased retail pressure.
**State Governments and Union Territories**
**Impact**
They are responsible for field-level monitoring and ensuring that retail fuel is not diverted for unauthorized use.
**Action Required**
Form special squads to take strict action against hoarding and diversion under the provisions of the EC Act and relevant Control orders.
**Industrial and Bulk Consumers**
**Impact**
These consumers are subject to international market pricing and are prohibited from using retail pumps to subsidize their operations.
**Action Required**
Stop the diversion of purchases from industrial channels to retail pumps and comply with standing procurement policies.
**Retail Consumers (Households, Farmers, Commuters)**
**Impact**
They are the primary beneficiaries of government-mandated price protection but are currently affected by localized artificial shortages caused by industrial diversion.
**Action Required**
Rely on official government communications and disregard rumors regarding fuel supply scarcity.
Key Entities Referenced
Ministry of Petroleum & Natural Gas: The primary central authority responsible for ensuring fuel supply stability and directing pricing strategies during international market disruptions.
Public Sector Oil Marketing Companies (PSU OMCs): State-owned entities tasked with absorbing losses on fuel sales to shield domestic retail consumers from international price volatility.
Essential Commodities Act (EC Act): The legal framework cited for taking enforcement action against the hoarding, black marketing, and unauthorized diversion of petroleum products.
Ministry of Petroleum & Natural Gas
India’s refining surplus capacity ensures full
domestic supply of Petrol and Diesel;
Government calls for discipline in the use of retail
fuel channels
PSU OMCs absorbing losses to protect retail consumers;
States/UTs asked to take strict action against diversion of
retail fuel supplies and unauthorised stocking
Posted On: 27 MAY 2026 8:14PM by PIB Delhi
The Government of India wishes to place on record, in unambiguous terms, that the country has more than
adequate supplies of petrol and diesel to meet every domestic need, retail and industrial alike. India is the
world’s fourth largest refiner, with an installed capacity of 258.1 million tonnes per annum across 22
operational refineries. Domestic consumption was 243.2 million tonnes in FY 2025-26; petroleum product
exports were 61.5 million tonnes in the same year, making India one of the largest exporters of refined
products globally. There is no supply issue of any kind.
Union Minister of Petroleum and Natural Gas, Shri Hardeep Singh Puri, has been in continuous
coordination with the Public Sector Oil Marketing Companies, State Governments and industry bodies to
ensure uninterrupted supply of Petrol & Diesel to all. The Govt. is constantly reviewing the situation.
Secretary (P&NG) reviewed the situation with the Chief Secretaries of the States/UTs, FICCI and CII
today. The picture that emerges from the field is consistent. There is no scarcity of any petroleum product.
There is, in pockets, a pattern of arbitrage that is creating the appearance of one.
The mechanism is straightforward. 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. PSU OMCs are
currently absorbing losses of around ₹550 crore per day on sale of Petrol, diesel and domestic LPG. 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.
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.
It has been observed that Private Oil Marketing Companies are experiencing a decline of approximately
38% in HSD offtake during the current month, across both retail outlets and bulk customers due to higher
rates fixed by them. This volume is shifting entirely to PSU oil marketing retail outlets. Coupled with this,
PSU bulk customer volumes have also recorded a decline of approximately 29%, which is also migrating
to retail outlets.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.
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 Government remains fully seized of the international situation. 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. Citizens are requested to
rely on official communication and to disregard rumours that mistake an arbitrage problem for a supply
problem.
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TM
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