BPCL, HPCL, IOC: Petrol, diesel excise duty hike in Budget 2026? 3 reasons to track OMC stocks

Uion Budget 2026: Shares of oil marketing companies (OMCs) Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation Ltd (IOC) are in spotlight on Sunday, February 1, amid fears that the government may raise excise duties on petrol and diesel. Investors would also be tracking commentaries regarding LPG under-recoveries and any allocation towards energy transition.

With crude prices now averaging below $65 a barrel for a while, a potential hike in excise duty on petrol and diesel in Budget 2026 could pose a risk to India's OMCs, MOFSL said.

"However, as current auto-fuel marketing margins over Brent of Rs 9 per litre are above our current assumption of Rs 3.5 per litre, a minor Rs 1-1.5 per litre duty adjustment is unlikely to lead to a sharp de-rating for OMCs," the brokerage said.

Nomura, in a note, earlier this month, said given the tight fiscal situation in India after the significant cuts in GST rates late last year, and OMCs making record-high integrated margins, the government may be tempted to increase excise duties on petrol and diesel in the Budget.

"We estimate Rs 16,000 crore increased collection for every Re 1 per litre increase in the excise duty for petrol and diesel. Impact to OMCs will be significant, with 13.5 per cent/12.4 per cent/ 10.9 per cent consolidated Ebitda hit to our FY26F estimates for HPCL/ BPCL/IOCL for every Re 1 per litre higher excise duty," it said.

The petroleum sector has been a significant contributor to the Central exchequer over the years, with more than Rs 4 lakh crore contribution in FY25 via excise, royalty, customs duty, GST, income tax and dividends,. Almost two-thirds of this came via excise duties on petrol and diesel in FY25, Nomura noted.

Analysts noted that OMCs' LPG under-recoveries have risen to Rs 53,700 crore, whereas the government has announced LPG compensation of Rs 30,000 crore to be disbursed on a monthly basis. Analysts are not expecting any incremental LPG subsidy since the compensation is provided on an ad-hoc basis.
Antique expects total FY27 LPG compensation at Rs 30,000 crore as it assumed same compensation run-rate to continue.

Nuvama said any allocation of funds towards energy transition and net zero-emission objectives for OMCs, but noted that amount allocated remains a key monitorable.