Indian Oil, Bharat Petroleum, and Hindustan Petroleum — India's three state-owned oil marketing companies (OMCs) — have accumulated cumulative under-recoveries of more than ₹59,000 crore on domestic LPG sales as of 31 July 2026, the Parliament was informed on Monday, 10 August. The losses stem from the government's decision to hold retail cooking gas prices below surging international market rates, a policy strain triggered by the West Asia crisis and the closure of the Strait of Hormuz.

Current Retail Price and Implicit Subsidy

The retail selling price (RSP) of a domestic 14.2 kg LPG cylinder has been held at ₹942 in Delhi since June 2026. According to Minister of State for Petroleum and Natural Gas Suresh Gopi, who replied in writing to a question in the Rajya Sabha, this price carried an implicit subsidy — or under-recovery — of more than ₹700 per cylinder in June 2026 and approximately ₹500 per cylinder in July 2026. By August, the implicit subsidy had narrowed to ₹188 per cylinder, reflecting some easing in international benchmarks.

Ujjwala Beneficiaries: A Targeted Buffer

For the more than 10.5 crore beneficiaries under the Pradhan Mantri Ujjwala Yojana (PMUY), the effective price is further reduced to ₹642 per cylinder — up to 4 refills per year — after a targeted subsidy of ₹300 per cylinder. This two-tier pricing structure means the government is simultaneously absorbing market-level losses at the OMC level and providing an additional cash transfer to the most economically vulnerable households.

Government Compensation Falls Short

The Centre has paid the three OMCs a compensation of ₹22,000 crore in FY23 and has committed to paying ₹30,000 crore each in FY26 and FY27. However, as Gopi noted in his parliamentary reply, even after accounting for these payments, the accumulated under-recoveries of the public sector oil companies on domestic LPG stood at more than ₹59,000 crore as of 31 July 2026 alone — underscoring how rapidly the gap has widened.

The West Asia Shock Behind the Numbers

The scale of losses is directly tied to a dramatic spike in global LPG benchmarks. Prior to the disruption, the Saudi Contract Price (Saudi CP) for the 50:50 propane-butane blend used in India's LPG supply stood at approximately $543 a tonne in February. Following the closure of the Strait of Hormuz in late February, the April contract price — the first set after the disruption tightened Mideast Gulf exports — surged to $775 a tonne, with propane at $750 and butane at $800. By June, the blended benchmark had edged further to $790 a tonne, according to official data — a rise of approximately 46% from the pre-crisis February level.

Petrol and Diesel: India's Comparative Restraint

Separately, the minister informed Parliament that despite unprecedented volatility in international crude oil and product prices, India's retail fuel price increases have been considerably more restrained than those seen in major developed and neighbouring countries. Government data shows that petrol prices at Indian retail outlets rose by 8.1% between June 2021 and June 2026, while diesel prices increased by 11.5% over the same period. This comes amid a broader global energy price shock that has pushed fuel costs sharply higher across Europe, the US, and several South Asian neighbours.

With international LPG benchmarks still elevated and the West Asia situation unresolved, the trajectory of OMC under-recoveries in the coming quarters will hinge on whether global supply routes normalise — and whether the government opts to pass on any further cost relief or absorb the burden through additional compensation.