Cabinet clears Rs 30,000 crore LPG subsidy for oil companies

The Union Cabinet, led by Prime Minister Narendra Modi, has approved a compensation package of Rs 30,000 crore for three public sector Oil Marketing Companies (OMCs): Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL). This decision aims to mitigate the under-recoveries from domestic LPG sales.

The Ministry of Petroleum and Natural Gas will oversee the distribution of this compensation, which will be disbursed in twelve tranches. This financial support is critical as international LPG prices have remained elevated throughout 2024-25.

Despite these high costs, the OMCs have maintained the domestic LPG prices at affordable levels, absorbing the losses and continuing the supply to households. This compensation will facilitate essential operations like crude and LPG procurement, debt servicing, and capital expenditure.

The government's decision underscores its commitment to protecting consumers from volatile global energy markets while ensuring the financial health of these public sector undertakings. The move also aligns with the wider goal of providing clean cooking fuel to all, including under the PM Ujjwala Yojana scheme.

The decision is seen as a strategic measure to safeguard both consumer interests and industrial viability.

The financial metrics of these companies are expected to improve following this compensation, enhancing their market positions and operational efficiencies.