Cabinet Approves Rs 30,000 Crore Fund To Reimburse OMCs For LPG Losses
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, the Cabinet said.
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The Union Cabinet on Friday approved a Rs 30,000-crore fund to reimburse oil market companies for losses in their liquified petroleum gas sales.
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, stated an official release issued following the Cabinet meeting.
The compensation will be paid to the three major public sector OMCs — Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. — for the under-recoveries incurred on sale of domestic LPG.
The distribution of the compensation within the OMCs will be done by the Ministry of Petroleum and Natural Gas. The compensation will be paid in 12 tranches, the government said.
Notably, domestic LPG cylinders are supplied at regulated prices to consumers by the public sector OMCs namely, IOCL, BPCL and HPCL. The international prices of LPG remained at high levels during 2024-25 and continue to remain high. However, to insulate consumers from fluctuations in international LPG prices, the increase in cost was not passed on to consumers of domestic LPG which led to significant losses for the three OMCs.
Despite the losses, the OMCs have ensured continuous supplies of domestic LPG in the country at affordable prices, the government pointed out.
"This step also underlines the government’s commitment to protect consumers from volatility in global energy markets while maintaining the financial health of these PSU OMCs," the release noted.
In the international market, the rate of Saudi CP—the international benchmark for LPG pricing—stands at around $575 per tonne, as compared to $385 in July 2023. It had shot up to $629 per tonne in February 2025.
The compensation to OMCs was earlier expected to be announced in the Union Budget for financial year 2025-26. The state-run entities had been facing losses over the past couple of years, as they refrained from passing on the burden of increased global prices to the end-consumers.
The Centre had, in October 2022, approved a one-time grant of Rs 22,000 crore to the OMCs to partially reimburse the losses they incurred from selling LPG at losses.
