Government will give LPG subsidy of ₹35,000 crore to IOC-BPCL-HPCL! Loss will be compensated
The government may give a subsidy of Rs 35,000 crore to public sector Indian Oil Corporation Limited (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) to compensate for the loss incurred on selling fuel this financial year (FY 2024-25). According to PTI news, the three oil marketing companies have kept the price of domestic LPG unchanged at Rs 803 per 14.2 kg cylinder from March 2024 despite the increase in the cost of raw materials. This has led to under-recovery on LPG sales and as a result their income fell sharply in April-September (the first half of the current financial year 2024-25).
Provision of subsidy likely in budget
According to the news, the total under-recovery on LPG sales to the industry in the current financial year is estimated to be around Rs 40,500 crore. Still, the government may give a total of Rs 35,000 crore in two financial years. Sources said IOC, BPCL and HPCL are likely to get Rs 10,000 crore during the current financial year 2024-25 and the remaining Rs 25,000 crore in the next financial year. The provision of subsidy is likely to be made in the Union Budget 2025-26, which will be presented by Finance Minister Nirmala Sitharaman on February 1.
Under-recovery of Rs 240
Sources said there is an under-recovery (or loss) of about Rs 240 on a 14. 2 kg cylinder, which state-owned fuel retailers sell to domestic households at the current price of Rs 803. Domestic LPG prices are regulated by the government to protect domestic households from high market rates. The government compensates IOC, BPCL and HPCL for these losses from time to time. The three were earlier compensated Rs 22,000 crore for the financial years 2021-22 and 2022-23. This was against an under-recovery of Rs 28,249 crore.
Domestic LPG prices unchanged from March 9, 2024
According to the report, out of the estimated under-recovery of Rs 40,500 crore for the current financial year, IOC’s share is likely to be Rs 19,550 crore, HPCL’s Rs 10,570 crore and BPCL’s Rs 10,400 crore. Domestic LPG prices have remained unchanged since March 9, 2024, when a cut of Rs 100 was made on a 14.2 kg cylinder just before the announcement of the general elections. Sources pointed out that international LPG prices in 2024 remain moderately high, even during the summer, leading to under-recovery. Prices are expected to remain high during the winter months.
