Government to Offset Subsidized LPG Losses by Offering Subsidies to OMCs

The Indian government is likely to allocate ₹35,000 crore in subsidies to state-owned oil marketing companies (OMCs) — Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) — to offset losses incurred from selling subsidized Liquefied Petroleum Gas (LPG). The decision comes as these companies continue to provide domestic LPG cylinders at a fixed price despite rising input costs, significantly affecting their earnings.  

Since March 2024, the price of a 14.2-kg domestic LPG cylinder has remained unchanged at ₹803. This price freeze has led to substantial under-recoveries, estimated at ₹40,500 crore for the current fiscal year. The loss per cylinder is calculated at around ₹240, which has placed considerable financial strain on the three OMCs.  

The government plans to distribute the ₹35,000 crore subsidy over two financial years. Approximately ₹10,000 crore is expected to be provided during the current fiscal year (2024-25), while the remaining ₹25,000 crore will likely be allocated in the Union Budget for FY 2025-26. Finance Minister Nirmala Sitharaman is scheduled to present the budget on February 1, 2025.  

This subsidy aims to mitigate the financial impact on OMCs while ensuring LPG affordability for domestic households. It reflects the government’s effort to balance fiscal responsibility with social welfare, especially during a period of fluctuating global energy prices. By absorbing a significant portion of the losses, the government is helping to maintain the financial health of these critical energy companies while shielding consumers from potential price hikes.  

The move underscores the challenges faced by OMCs operating under regulated pricing frameworks and highlights the government’s role in sustaining energy security and affordability for its citizens.