The Indian government is getting ready to pay back state-run oil companies for losses they faced in selling subsidised LPG. These losses, called under-recoveries, happened because global fuel prices shot up but the local LPG price stayed the same.
To cover these losses, the government plans to use money collected from recent excise duty hikes on petrol and diesel. This move shows that the Centre is not letting oil companies take the full hit for keeping LPG prices stable for consumers.
Why This Matters
From April to December 2024, public oil firms like Indian Oil (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) lost around ₹30,000 crore. These companies absorbed the cost instead of passing it on to Indian households.
The reason? International LPG prices went up fast, especially after the Russia-Ukraine war. But back home, prices of domestic LPG cylinders were kept mostly unchanged. This decision helped common people but left oil companies bleeding cash.
Who’s Paying for the Loss?
The Finance Ministry is now close to finalising a compensation package. It will use extra funds earned through the ₹2 per litre excise duty hike on petrol and diesel. This fund will come from the Consolidated Fund of India.
One top official said, “OMCs are part of the same government family. We don’t want them to suffer alone.” That’s why the government is stepping in now.
What Will Oil Companies Do With the Money?
The oil firms will be free to use the money to:
- Cover their LPG under-recovery
- Improve infrastructure for better services
The Petroleum Ministry and Finance Ministry are still checking all data before deciding the final amount.
This move is not new. In October 2022, the government gave ₹22,000 crore to oil firms for similar under-recoveries during 2021-22.
This is not just about oil companies getting paid. It’s about how the government is handling price shocks while protecting both consumers and state firms. And it shows that LPG is not just a gas—it’s a political and economic lifeline.
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