A fall in international LPG prices during July helped ease cooking gas losses for state-run oil marketing companies, offering relief from elevated under-recoveries that have weighed on their earnings.
During their post-earnings investor calls, Indian Oil Corp. (IOC), Bharat Petroleum Corp. Ltd. (BPCL) and Hindustan Petroleum Corp. Ltd. (HPCL) said losses on subsidised domestic LPG cylinders eased to around Rs 475-490 per cylinder in July, compared with significantly higher levels earlier, as Saudi Arabia's benchmark contract prices softened.
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The Saudi Arabia's decision to set the August LPG Contract Price at $592 per tonne has strengthened the outlook, with OMCs estimating under-recoveries could decline to nearly Rs 210 per cylinder, assuming global prices remain unchanged.
IOC said LPG under-recoveries could average around Rs 250 per cylinder during the current quarter if Saudi CPs remain at prevailing levels.
However, the company cautioned that any fresh increase in international LPG prices would once again widen losses.
Despite the recent moderation, the accumulated financial burden remains substantial.
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HPCL said its uncompensated LPG under-recovery buffer widened to Rs 16,400 crore as of June-end. BPCL's outstanding LPG loss buffer rose to Rs 15,800 crore, even after receiving about Rs 19,000 crore in government compensation.
IOC continues to carry the largest exposure among the three public-sector refiners, with its LPG under-recovery buffer increasing to Rs 29,700 crore despite government support.
The commentary underscores that while softer global LPG prices have improved near-term profitability, the financial health of OMCs remains closely tied to international benchmark prices and the extent of government compensation for selling domestic cooking gas below cost.
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