OMC shares rise as Finance Ministry mulls Rs 32,000-35,000 crore fund to compensate for LPG under-recovery

It is learnt that the LPG under-recovery of the OMCs could be funded from the petroleum excise duty collected by the Centre, as the government's view is that the oil marketing companies cannot be allowed to continue to suffer on account of these losses.

Shares of oil marketing companies are marginally higher on a subdued day of trade on July 10, on hopes of that the Finance Ministry may soon approve setting up of a fund to specifically address the under-recovery on account of losses incurred on LPG subsidies, following which the proposal would then be sent to the Cabinet for approval.

Moneycontrol reported citing sources that the under-recovery will be funded through the proceeds of excise duty hikes, and will be channelled via the Consolidated Fund of India. The Finance Ministry is finalizing the contours of the deal, and a Cabinet approval for the compensation could be sought soon, it is learnt.

Sources also told Moneycontrol that the Finance Ministry has agreed to this proposed fund that be to the tune of Rs 32,000-35,000 crore, though this is lower than the Petroleum Ministry's initial demand of Rs 40,000 crore.

In April this year, domestic LPG prices were raised by Rs 50 per cylinder, which resulted in a decrease in under-recoveries. OMCs have been hopeful in recent quarters about some mechanism to address the rising LPG recoveries.

"We are hopeful some mechanism definitely because after increase of Rs 50, now the under-recovery has come down every month, we are expecting around Rs 650-700 crore per month for BPCL. And we are hopeful some mechanism will be put in place so that maybe on a quarterly basis, we can get the reimbursement, whatever under recovery," VRK Gupta, Dir - Finance at BPCL had said in May 2025.

BPCL said the current under recovery per cylinder is estimated around Rs 170 per cylinder, and the total negative buffer as on March 31, 2025 is Rs 10,446 crore.

HPCL has absorbed almost Rs 10,900 crore of LPG under recovery, the company said in May 2025, but after the government raised prices of LPG by Rs 50, the under-recovery came down to around Rs 165-170 per cylinder for the company.

The Centre has in the past said that the excise duty hike on petrol and diesel would be used for payment of the LPG under-recovery.