**Policy Summary: Compensation for Under-Recoveries on Domestic LPG Sales**
On August 8, 2025, the Union Cabinet, chaired by the Prime Minister, approved a compensation package of Rs. 30,000 crore for three Public Sector Oil Marketing Companies (OMCs): Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL). This compensation addresses the under-recoveries incurred by these OMCs on the sale of domestic Liquefied Petroleum Gas (LPG).
The necessity for this compensation arose from high international LPG prices throughout 2024-25, which continue to persist. To shield domestic consumers from these fluctuations, the OMCs absorbed the increased costs, resulting in substantial financial losses. Despite these losses, the OMCs maintained a continuous supply of domestic LPG at regulated prices.
The Rs. 30,000 crore will be distributed among the three OMCs by the Ministry of Petroleum and Natural Gas in twelve tranches. This financial support will enable the OMCs to meet critical operational needs, including crude and LPG procurement, debt servicing, and capital expenditure, thus ensuring an uninterrupted supply of LPG to households nationwide. The policy aims to protect consumers from global energy market volatility and sustain the financial stability of the Public Sector OMCs. This measure also reinforces the government's commitment to ensuring the widespread availability of clean cooking fuel, including for beneficiaries of schemes such as the PM Ujjwala Yojana.
Key Entities Referenced
Ministry of Petroleum and Natural Gas: The Indian government ministry responsible for the exploration, production, refining, distribution, marketing, and conservation of petroleum, natural gas, and petrochemicals.
Union Cabinet: The council of ministers, led by the Prime Minister, that constitutes the executive branch of the Government of India.
Narendra Modi: The Prime Minister of India.
IOCL: Indian Oil Corporation Limited, a Public Sector Oil Marketing Company.
BPCL: Bharat Petroleum Corporation Limited, a Public Sector Oil Marketing Company.
HPCL: Hindustan Petroleum Corporation Limited, a Public Sector Oil Marketing Company.
Domestic LPG: Liquefied Petroleum Gas for domestic use, supplied at regulated prices.
PM Ujjwala Yojana: A flagship scheme aimed at providing clean cooking fuel to households.
Ministry of Petroleum & Natural Gas
Cabinet approves Rs 30,000 crore as compensation
to Public Sector Oil Marketing Companies for losses
in Domestic LPG
Posted On: 08 AUG 2025 4:12PM by PIB Delhi
The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, has approved compensation
amounting to Rs.30,000 crore to the three Public Sector Oil Marketing Companies (IOCL, BPCL & HPCL)
for the under- recoveries incurred on sale of domestic LPG. The distribution of the compensation within the
OMCs will be done by the Ministry of Petroleum and Natural Gas. The compensation will be paid in twelve
tranches.
Domestic LPG Cylinders are supplied at regulated prices to consumers by the public sector Oil Marketing
companies namely, IOCL, BPCL, HPCL.
The international prices of LPG remained at high levels during 2024-25 and continue to remain high.
However, to insulate consumers from fluctuations in international LPG prices, the increase in cost was not
passed on to consumers of domestic LPG which led to significant losses for the three OMCs. Despite the
losses, the Public Sector Oil Marketing Companies have ensured continuous supplies of domestic LPG in the
country at affordable prices.
This compensation will allow the OMCs to continue meeting their critical requirements such as crude and
LPG procurement, servicing of debt, and sustaining their capital expenditure, thereby ensuring uninterrupted
supply of LPG cylinders to households across the country.
This step also underlines the Government’s commitment to protect consumers from volatility in global energy
markets while maintaining the financial health of these PSU OMCs. It also reaffirms the objective of ensuring
the widespread availability of clean cooking fuel to all consumers of domestic LPG, including those under
flagship schemes like PM Ujjwala Yojana.
***
MJPS/BM
(Release ID: 2154130)