OMCs Face Loss of ₹700 Per LPG Cylinder Even After Price Increase: Government

Despite a recent increase in the price of domestic LPG cylinders, oil marketing companies (OMCs) are facing a significant loss of approximately ₹700 per cylinder, according to the Government.  

This financial strain is attributed to the sharp rise in international energy prices, compounded by conflicts in West Asia affecting supply. 

Price Hike Insufficient to Cover Costs 

The recent price hike of ₹29 per domestic LPG cylinder has not been sufficient to counter the high costs faced by oil companies.  

Currently, the cost to supply a domestic LPG cylinder has escalated to over ₹1,600, driven by an increase in international LPG prices.  

The West Asia conflict has significantly disrupted supplies, pushing up benchmark prices such as the Saudi Contract Price, which rose 46% from $543 per tonne to $790 per tonne between May and June. 

Impact on Consumers and Subsidies 

The consumers in Delhi are now paying ₹942 for a 14.2 kg LPG cylinder, an increase from ₹913. Beneficiaries of the Pradhan Mantri Ujjwala Yojana will pay ₹642 after a ₹300 subsidy per refill.  

However, the subsidy for these beneficiaries is now limited to 4 refills annually, reduced from 9. Despite these changes, consumers continue to pay less compared to global market rates for petroleum products. 

Oil marketing companies have also raised petrol, diesel and CNG prices to partially offset losses from the steep increase in global crude and natural gas prices.  

The price of a 19 kg commercial LPG cylinder has been revised multiple times and now costs ₹3,113.50 in Delhi. 

Read More: India's Fuel Exports Hit 4-Year Low Amid Refinery Maintenance and High Local Demand! 

Substantial Financial Impact on OMCs 

Despite attempts to absorb some of the cost burdens without fully passing them onto consumers, OMCs are grappling with substantial under-recoveries estimated at ₹60,000 crore for FY26, up from ₹41,338 crore the previous fiscal year.  

This under-recovery represents the mismatch between regulated retail prices and actual international costs. 

Supply Chain and Production Adjustments 

There is no shortage of petroleum products despite global disruptions. With around 54% of India's LPG imports transiting through the conflict-affected Strait of Hormuz, domestic refiners have ramped up production by more than 60% to address potential supply constraints. 

Conclusion 

The ongoing global energy price instability, compounded by geopolitical tensions, continues to strain OMCs, with substantial losses despite domestic price adjustments. Efforts to manage subsidies and increase domestic production are ongoing to mitigate these financial pressures. 

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