Cabinet Approves Rs 30,000-Crore LPG Subsidy To Compensate Oil Firms For Losses

Cabinet on Friday approved Rs 30,000 crore LPG subsidy to state-run oil companies -- Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) -- to compensate for losses incurred from selling LPG at below cost over the past 15 months.

The compensation to oil marketing companies (OMCs) will be paid in 12 tranches, as per an official statement.

The international prices of LPG were at high levels during 2024-25 and continue to remain high. However, to insulate consumers from fluctuations in international LPG prices, the increase in cost was not passed on to consumers of domestic LPG, leading to significant losses for the three OMCs.

Despite the losses, public sector oil marketing companies have ensured continuous supplies of domestic LPG in the country at affordable prices.

"The Union Cabinet chaired by Prime Minister Narendra Modi has approved compensation amounting to Rs 30,000 crore to the three Public Sector Oil Marketing Companies (IOCL, BPCL & HPCL) for the under-recoveries incurred on sale of domestic LPG," the statement said.

This compensation will allow OMCs to continue meeting their critical requirements such as crude and LPG procurement, servicing of debt, and sustaining their capital expenditure, thereby ensuring uninterrupted supply of LPG cylinders to households across the country, it added.

The distribution of the compensation within the OMCs will be done by the Ministry of Petroleum and Natural Gas.

"This step also underlines the government's commitment to protect consumers from volatility in global energy markets while maintaining the financial health of these PSU OMCs," the statement said.  

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