Cabinet Approves ₹30,000 Crore Compensation to OMCs for LPG Price Under-Recoveries

The compensation will be distributed among the three OMCs by the Ministry of Petroleum and Natural Gas and will be paid in twelve tranches.

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a ₹30,000 crore compensation package for three major Public Sector Oil Marketing Companies (OMCs) — Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) — to cover the under-recoveries they incurred from selling domestic LPG cylinders at regulated prices.

The compensation will be distributed among the three OMCs by the Ministry of Petroleum and Natural Gas and will be paid in twelve tranches.

Why the Compensation Was Needed

Public sector OMCs supply domestic LPG cylinders to households at government-regulated prices to ensure affordability, particularly for low-income consumers, including those under flagship programmes such as the Pradhan Mantri Ujjwala Yojana (PMUY).

During FY 2024–25, international LPG prices remained significantly high and have continued to show volatility. To protect domestic consumers from price shocks, the government absorbed the price increase instead of passing it on, resulting in substantial revenue losses for the OMCs.

Despite these losses, IOCL, BPCL, and HPCL maintained uninterrupted supply of LPG across the country, ensuring millions of households had continuous access to clean cooking fuel.

Impact of the Compensation The approved compensation will enable the OMCs to:

• Procure crude oil and LPG without disruptions

• Meet debt servicing obligations

• Sustain capital expenditure for infrastructure and operational upgrades

• Maintain steady supply of LPG cylinders at affordable prices

By shoring up the financial health of these companies, the government ensures that they can continue to serve households nationwide while maintaining operational resilience.

Reinforcing Commitment to Affordable Clean Energy This decision underscores the government’s dual commitment to:

1. Protecting consumers from the volatility of global energy markets

2. Ensuring the financial stability of critical public sector enterprises that form the backbone of India’s energy distribution system

The move also strengthens the government’s long-term objective of making clean cooking fuel universally accessible, especially to vulnerable sections of society.

Supporting Flagship Schemes

The compensation package indirectly supports schemes such as PMUY, under which over 10 crore deposit-free LPG connections have been provided to women from poor households since 2016. By stabilising OMC operations, the government ensures that subsidised LPG connections continue to benefit millions of households without interruption.

A Shield Against Global Energy Volatility

With global LPG prices influenced by international crude oil trends, geopolitical tensions, and supply-demand imbalances, the Cabinet’s decision acts as a financial shield for both consumers and suppliers. It maintains price stability for domestic LPG users while allowing OMCs to recover operational viability.