Fuel Giants: Government's Rs 35,000 Crore Lifeline for LPG Under-Recoveries

The Indian government plans to subsidize state-owned fuel corporations like IOC, BPCL, and HPCL with Rs 35,000 crore to offset losses from selling domestic LPG below cost. This move addresses under-recoveries due to unchanged LPG prices and will be included in the 2025-26 Union Budget.

The Indian government is poised to extend a substantial lifeline of Rs 35,000 crore to state-owned fuel corporations, including Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL), sources report. This subsidy aims to offset the losses incurred by these companies selling domestic LPG below market rates during the current fiscal year.

Despite soaring input costs, the fuel retailers maintained domestic LPG prices at Rs 803 per 14.2-kg cylinder since March 2024, resulting in significant under-recoveries and plummeting earnings. The total industry under-recovery is pegged at around Rs 40,500 crore, with the government covering Rs 35,000 crore over two fiscal years.

Part of this subsidy initiative is expected to be reflected in the Union Budget for 2025-26, to be presented by Finance Minister Nirmala Sitharaman. This measure reiterates the government's ongoing efforts to cushion consumers from international market fluctuations while supporting state-run fuel entities.

(With inputs from agencies.)