The Union Cabinet has approved a Rs. 30,000 crore compensation package for the three Public Sector Oil Marketing Companies (IOCL, BPCL, and HPCL) to support LPG price stability. This initiative aims to offset the under-recoveries incurred from selling domestic LPG at regulated prices. The Ministry of Petroleum and Natural Gas will oversee the distribution of the compensation, which will be disbursed in twelve tranches. This helps them to balance the losses incurred on sale of cooking gas cylinders below the market price in consumer’s interest. The companies will not have to wait for the end of the financial year for a one-time payment. 

High International Prices

International LPG prices stayed high in 2024-25 and are still high. To protect consumers from these price changes, the extra cost was not charged to people using domestic LPG, which caused big losses for the three oil marketing companies. Even with these losses, the public sector companies continued to supply domestic LPG in the country at affordable prices.

In FY25, the three state-owned refiners lost over ₹41,000 crore by selling LPG cylinders for less than their cost price. In FY26, these losses are still continuing. The government raised the price of a domestic LPG cylinder by ₹50 in April, but oil companies are still losing less than ₹200 on each cylinder.

This compensation will allow the 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.