OMCs Losing ₹700 Per LPG Cylinder Despite Price Hikes

Why Are Oil Marketing Companies Still Incurring Losses On LPG Sales?

India’s public sector Oil Marketing Companies (OMCs) continue to incur significant losses on domestic liquefied petroleum gas (LPG) sales despite recent price hikes, according to the Ministry of Petroleum and Natural Gas (MoPNG).

The ministry said OMCs are currently facing an under-recovery of approximately ₹700 on every 14.2 kg domestic LPG cylinder sold. Under recovery refers to the gap between the actual cost of procuring and supplying LPG and the regulated retail price charged to consumers.

The disclosure comes shortly after the government approved another increase of ₹29 per cylinder, marking the second LPG price hike in just three months as global energy markets remain under pressure due to the ongoing West Asia crisis.

Despite the latest revision, the government said retail prices remain substantially below international market rates, forcing OMCs to absorb large losses.

How Has The West Asia Crisis Impacted LPG Prices?

The Ministry attributed the sharp rise in LPG costs primarily to disruptions caused by the escalating conflict in West Asia.

According to the government, the tightening of activity around the Strait of Hormuz severely affected global energy supply chains. The strategic waterway is a crucial route for India’s energy imports, including LPG.

The ministry noted that approximately 54% of India’s LPG imports are routed through the Strait of Hormuz, making domestic supplies particularly vulnerable to geopolitical disruptions.

As a result, the Saudi Contract Price (CP), which serves as a benchmark for LPG pricing, has increased by 46% since February 28, significantly raising the cost of imports.

The government said the overall cost of supplying a domestic LPG cylinder has now crossed ₹1,600 per cylinder.

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How Large Is The Financial Burden On OMCs?

The financial impact on state owned fuel retailers has been substantial.

According to the ministry, cumulative under-recoveries on domestic LPG reached ₹60,000 crore by the end of the last financial year, a dramatic increase from just ₹1,338 crore in the previous year.

To ease the burden, the Union Cabinet has already approved compensation of ₹30,000 crore for OMCs.

However, the remaining losses continue to exert pressure on the balance sheets of fuel retailers, even after multiple fuel price increases across different categories.

How Do Domestic LPG Prices Compare With Global Rates?

The government emphasized that domestic LPG prices remain heavily subsidized relative to international market levels.

Following the latest increase, the price of a standard 14.2 kg LPG cylinder in Delhi has risen from ₹913 to ₹942 for general consumers.

For beneficiaries of the Pradhan Mantri Ujjwala Yojana (PMUY), the effective price remains significantly lower at ₹642 per cylinder.

According to MoPNG, the Ujjwala price reflects a discount of nearly 60% compared to prevailing international prices, while non-PMUY consumers continue to receive LPG at roughly 45% below global market rates.

The ministry contrasted household LPG pricing with commercial cylinders used by restaurants and hotels. A 19 kg commercial LPG cylinder in Delhi currently costs ₹3,113.50, equivalent to about ₹164 per kilogram, compared to approximately ₹66 per kilogram paid by domestic consumers after the latest revision.

What Does This Mean For Consumers And The Energy Sector?

The latest price increase highlights the growing strain on India’s energy ecosystem amid global geopolitical uncertainty.

In addition to LPG hikes, petrol and diesel prices have increased by a cumulative ₹7.50 per litre since mid-May, while compressed natural gas (CNG) prices have risen by around ₹6 per kilogram.

The government maintains that despite these revisions, domestic consumers continue to receive substantial support through regulated pricing and targeted subsidy programmes.

As global energy markets remain volatile, policymakers face the challenge of balancing consumer affordability with the financial sustainability of OMCs that play a critical role in India’s fuel distribution network.