Government to Provide ₹35,000 Crore LPG Subsidy to IOC, BPCL, and HPCL

The Indian government is set to offer a ₹35,000 crore subsidy to state-owned oil companies Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation Ltd (IOC), and Hindustan Petroleum Corporation Ltd (HPCL). This will help cover the losses these companies have faced due to the selling price of LPG remaining unchanged while input costs have increased.

Losses on LPG Sales

The 3 fuel retailers have kept the price of domestic LPG at ₹803 per 14.2-kg cylinder since March 2024 despite rising raw material costs. This has led to under-recoveries, meaning they have lost money on each cylinder sold. The total under-recovery for the industry in the current fiscal year is estimated at ₹40,500 crore.

Subsidy Distribution

The ₹35,000 crore subsidy will be distributed over 2 financial years. IOC, BPCL, and HPCL are expected to receive ₹10,000 crore in the current fiscal year (2024-25) and the remaining ₹25,000 crore in the next fiscal year. The subsidy is expected to be included in the Union Budget for 2025-26, which will be presented by Finance Minister Nirmala Sitharaman on February 1, 2025.

Estimated Under-Recovery by Company

Out of the ₹40,500 crore under-recovery, IOC is expected to account for ₹19,550 crore, HPCL ₹10,570 crore, and BPCL ₹10,400 crore.

Price Regulation and Its Impact

Domestic LPG prices are regulated by the government to protect households from rising international prices. However, since India imports LPG, the local price is lower than the international price (Saudi CP). This price difference results in under-recoveries for IOC, BPCL, and HPCL.

Past Compensation and Future Plans

In the past, the government provided ₹22,000 crore in compensation for losses in the 2021-22 and 2022-23 fiscal years. With prices of LPG remaining high in 2024, especially during the winter months, the government is again stepping in to cover the losses.

The ₹35,000 crore subsidy will likely be provided alongside taxes to ensure the oil companies receive the full amount without any deductions for additional tax liabilities.

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