Govt approves Rs 30,000 crores compensation to oil marketing companies for LPG under-recoveries
NEW DELHI, AUG 8 : The government on Friday announced a Rs 30,000 crore compensation package for public sector Oil Marketing Companies (OMCs) to offset losses incurred from selling domestic LPG at regulated prices. The compensation will be extended to Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL).
This marks the second major relief provided by the government, following a Rs 22,000 crore grant in October 2022. With this latest allocation, total financial support to OMCs now amounts to Rs 52,000 crore.
Announcing the decision, Information and Broadcasting Minister Ashwini Vaishnaw said the compensation would help the OMCs meet essential financial needs such as crude and LPG procurement, debt servicing and capital expenditure.
The Ministry of Petroleum and Natural Gas will oversee the distribution of the compensation, which will be disbursed in twelve tranches.
As per the government, the domestic LPG is supplied at regulated prices by public sector OMCs. However, during FY 2024–25, international LPG prices remained elevated, and the increased costs were not passed on to consumers, resulting in significant losses for IOCL, BPCL, and HPCL.
“Despite these losses, the public sector OMCs continued to ensure the uninterrupted supply of affordable LPG,” the government said in a press note.
In October 2022, the government approved a one-time grant of Rs 22,000 crore to compensate OMCs for LPG under-recoveries between June 2020 and June 2022—a period marked by a 300% surge in international LPG prices, while domestic prices rose by only 72%. Estimated losses during that period stood at Rs 28,249 crore.
In FY 2024–25, industry-wide losses are projected at Rs 41,338 crore, with IOCL alone incurring Rs 19,000 crore in under-recoveries.
The government has also approved the continuation of a targeted LPG subsidy of Rs 300 per 14.2 kg cylinder (proportionately for 5 kg cylinders) for up to 9 refills per year for Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries in FY 2025–26. The initiative will entail an expenditure of Rs 12,000 crore.
Launched in May 2016, PMUY aims to provide deposit-free LPG connections to adult women from economically weaker households. As of July 1, 2025, the scheme covers 10.33 crore beneficiaries across India.
India meets around 60% of its LPG demand through imports, making prices vulnerable to global fluctuations. To insulate vulnerable households, the government introduced a targeted subsidy of Rs 200 per cylinder in May 2022, which was later increased to Rs 300 in October 2023.
-PTI
