Union Cabinet likely to consider LPG compensation today: CNBC-Awaaz

Union Cabinet likely to consider LPG compensation today: CNBC-Awaaz

Union Cabinet is likely to consider LPG compensation on August 8, CNBC-Awaaz reported citing sources.

Compensation will be provided to oil marketing companies to cover their losses, the channel reported adding that Cabinet may approve approximately Rs 31,000-crore compensation amount.

OMCs reportedly incurred a cumulative LPG under-recovery of about Rs 30,000 crore in April-December 2024, driven by elevated international fuel prices. Given the financial strain, the oil ministry had approached the Finance Ministry ahead of budget 2025, seeking compensation to mitigate these losses.

The government has in the past compensated OMCs for losses arising from keeping LPG prices stable despite global volatility. In October 2022, it approved Rs 22,000 crore as one-time compensation for under-recoveries incurred in FY22.

The Ministry of Petroleum and Natural Gas, along with the Ministry of Finance, has been assessing the losses by OMCs including, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) to arrive at a final compensation amount, reported Moneycontrol last month.

In the first nine months of FY25, IOCL had reported under-recovery of Rs 14,325 crore on the sale of LPG cylinders, while BPCL and HPCL reported under-recoveries of Rs 7,228 and Rs 7,599 crore, respectively.

As OMCs kept cylinder prices unchanged despite high global prices of the fuel, the huge LPG under-recovery has hit their bottom line. The country is dependent on imports for the majority of domestic LPG consumption.