and Rosneft-backed

are profiting from a market distortion created by

' refusal to cut pump prices, even as international fuel prices have fallen sharply.

Crude prices are down 20% year-on-year, petrol by 14% and diesel by 17%, yet domestic pump prices remain frozen. This has resulted in windfall margins for both state-run and private-sector fuel retailers.

Reliance Industries and Nayara Energy are using these margins to undercut state-run firms by up to ₹3 per litre, steadily eroding their market share in the retail petrol and diesel business, according to industry executives. In April-May, the private sector's share of diesel sales increased to 11.5% from 9.6% a year earlier. In petrol, the share increased to 10% from 9%.

At the same time, in the bulk diesel business, state-run and private suppliers were locked in a fierce battle, offering fuel at steep discounts to retail prices-highlighting just how much room there is to cut prices in a truly competitive market, according to executives. State-run Indian Oil Corporation regained significant share from private players in the bulk diesel segment during April-May.

State-run firms are reluctant to reduce pump prices, multiple executives said, as they want to use the expanded margins from petrol and diesel to offset losses incurred on LPG sales to households. The government regulates LPG prices and is expected to compensate state-run firms for losses when the fuel is sold below market rates. However, in 2024-25, Indian Oil Corporation, Hindustan Petroleum, and Bharat Petroleum suffered a combined loss of ₹41,266 crore on LPG sales and received no compensation. Private fuel retailers, by contrast, do not bear such LPG-related losses.