Cabinet clears ₹30,000 cr relief for IOCL, BPCL, HPCL to offset LPG losses

The Union Cabinet on Friday approved a compensation package of ₹30,000 crore for public sector oil marketing companies— Indian Oil Corporation Limited (IOCL ), Bharat Petroleum Corporation Limited (BPCL) , and Hindustan Petroleum Corporation Limited (HPCL) —to offset under-recoveries on the sale of domestic liquefied petroleum gas (LPG).

The compensation package, to be disbursed in 12 tranches, will be allocated by the Ministry of Petroleum and Natural Gas, as per the official statement.

“The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved compensation amounting to ₹30,000 crore to the three public sector oil marketing companies (IOCL, BPCL & HPCL) for the under-recoveries incurred on sale of domestic LPG,” the release noted.

As per the release, 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 Public Sector Oil Marketing Companies have ensured continuous supplies of domestic LPG in the country at affordable prices,” it added.

The 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.

“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. It also reaffirms the objective of ensuring the widespread availability of clean cooking fuel to all consumers of domestic LPG, including those under flagship schemes like PM Ujjwala Yojana,” the release noted.

Pradhan Mantri Ujjwala Yojana (PMUY) is a flagship social welfare scheme launched by the Centre on May 1, 2016, to provide clean cooking fuel (LPG) to poor households. As on July 1, 2025, there are about 10.33 crore PMUY connections across the country.

In a separate development, the Union Cabinet approved the targeted subsidy of ₹300 per 14.2 kg cylinder for up to 9 refills per year (and proportionately pro-rated for 5 kg cylinder) to the beneficiaries of PMUY during FY 2025-26 at an expenditure of ₹12,000 crore.

India imports about 60% of its LPG requirement. To shield PMUY beneficiaries from the impact of sharp fluctuations in international LPG prices and to make cooking gas more affordable, the government introduced a targeted subsidy of ₹200 per 14.2 kg cylinder (up to 12 refills per year) in May 2022. This subsidy was proportionately pro-rated for 5 kg connections.

In October 2023, the government increased the targeted subsidy to ₹300 per 14.2 kg cylinder, continuing the same annual limit and pro-rata benefit for smaller connections.