Oil marketing companies' domestic LPG under-recovery has surged past Rs 59,000 crore as of July 2026, highlighting the mounting financial strain on state-run fuel retailers despite substantial government support.
The Centre has provided or approved compensation of around Rs 52,000 crore to cushion the impact, the government said in a Rajya Sabha question-and-answer session.
The sharp increase in LPG costs comes amid elevated global energy prices following the escalation of tensions in West Asia and disruptions linked to the Strait of Hormuz, putting pressure on the economics of subsidised domestic cooking gas.
According to data shared by the government in a Rajya Sabha, domestic LPG continues to be sold below its cost to consumers, with the gap being absorbed by oil marketing companies and partly offset through government compensation.
The Centre paid Rs 22,000 crore to OMCs in FY23 to compensate them for losses arising from the sale of domestic LPG below cost. It has also approved Rs 30,000 crore in compensation for FY26 and FY27.
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Despite the support, OMCs' cumulative under-recovery on domestic LPG stood at more than Rs 59,000 crore by July, highlighting the widening gap between international LPG prices and the retail price in India.
In Delhi, the price of a 14.2-kg domestic LPG cylinder has remained unchanged at Rs 942 since June 2026.
However, the implicit subsidy embedded in the retail price has varied sharply as international prices moved higher.
The implicit subsidy was estimated at more than Rs 700 per cylinder in June and around Rs 500 in July.
In August, the implicit subsidy has moderated to about Rs 188 per cylinder.
The data underscores the pressure on the government and OMCs from volatile global energy prices while the Centre continues to shield household consumers from the full impact of higher LPG costs.
With geopolitical tensions in West Asia and risks around the Strait of Hormuz continuing to influence energy markets, any sustained rise in international LPG prices could further increase the financial burden on OMCs and the government.
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