Cabinet approves one-time grant of Rs 22,000 crore to public OMCs for selling domestic cooking gas

The Union Cabinet has approved a one-time grant of Rs 22,000 crore to public oil marketing companies (OMCs) in India, wherein companies like Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp will get a chance to cover some of the losses they incurred on selling domestic cooking gas LPG below cost in the last two years. As per the data available, these state-owned fuel retailers incurred heavy losses on the sale of petrol and diesel due to non-revision of prices for a record 137 days from November 4, 2021, to March 22, 2022.

On Wednesday, Union Minister Anurag Thakur said, “LPG prices are increasing across the world. The one-time grant of Rs 22,000 crores has been given to oil marketing companies of public sector undertakings so that the burden of rising prices does not fall on common people.”

Also read: Bharat Petroleum, IOC, HPCL shares rise as govt mulls Rs 22,000-crore subsidy

He said, “It will help PSU OMCs in their commitment to Atma Nirbhar Bharat Abhiyaan by ensuring unhindered domestic LPG supplies."

Earlier, Thakur noted that the international prices of LPG rose 300 per cent between June 2020 and June 2022 but the increased cost was not fully passed on to consumers, even as domestic LPG prices rose by 72 percent during this period.

However, to insulate consumers from fluctuations in international LPG prices, the cost increase was not fully passed on to consumers of domestic LPG, the minister said at the Cabinet briefing.

"Despite these losses, the three PSU OMCs have ensured continuous supplies of this essential cooking fuel in the country. The government has therefore decided to give a one-time grant to the three PSU OMCs for these losses in domestic LPG," it said.

The Union Cabinet approved a one-time grant amounting to Rs 22,000 crore to these three OMCs. “This decision will help the PSU OMCs to continue their commitment to the Atmanirbhar Bharat Abhiyaan, ensuring unhindered domestic LPG supplies and also supporting the procurement of Make in India products,” a notification issued by the ministry said.

According to recent reports, state-owned oil marketing companies Indian Oil Corporation, Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) may, for the first time, post-loss for the second consecutive quarter with a combined loss of Rs 21,270 crore in July-September, on holding petrol and diesel prices below the cost of production.

The three state-owned firms — IOC, BPCL, and HPCL, in the first quarter of the current fiscal year (April-June) posted a combined loss of Rs 18,480 crore due to erosion in the marketing margin on petrol, diesel, and domestic LPG.

Earlier this year, Moody’s Investor Service in a report said that since November last year, state-owned refining and marketing companies together incurred a loss of about $2.25 billion (Rs 17,000 crore) in revenue on petrol and diesel.

(With agency inputs)