The Oil Ministry has informed the Parliamentary Standing Committee on petroleum and natural gas that it will release the remaining ₹17,500 crore compensation to Oil Marketing Companies (OMCs) on LPG under recoveries in seven equal tranches during the current financial year ending March 2027. In August 2025, the Ministry of Petroleum and Natural Gas (MoPNG) announced a compensation of ₹30,000 crore for the three OMCs — Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) — for under-recoveries on liquefied petroleum gas (LPG).
Under-recoveries and payout structure explained
The under-recoveries on domestic LPG (negative buffer balance) of the OMCs stood at ₹41,267 crore as on March 31, 2025. In view of the accumulated under-recoveries and the projected losses up to March 31, 2026, the government approved compensation of ₹30,000 crore in August 2025, to be released in 12 equal tranches commencing from November 2025, the MoPNG said in a response to the panel. “Accordingly, during FY26, five tranches aggregating to ₹12,500 crore are being released, while the balance amount of ₹17,500 crore will be released in FY27 in the remaining seven tranches,” it added.
Since the Cabinet, while approving the compensation package of ₹30,000 crore, stipulated a 12-tranche disbursement arrangement, the Budget provisions for FY26 and FY27 have been scheduled accordingly,” the Ministry said. In August last year, the government approved a ₹30,000 crore compensation for LPG under recoveries in FY25 and a ₹12,000 crore subsidy to continue providing Ujjwala consumers with affordable LPG cylinders in FY26.
Rising losses and price pressures
Cumulatively, the OMCs incurred an under-recovery of around ₹41,700 crore in FY25, amounting to roughly ₹220 per 14.2 kg cylinder. The total LPG under-recovery stood at around ₹49,210 crore as of June 30, 2025.
On April 1, 2026, the Oil Ministry, after increasing the prices of commercial LPG, said that the price increase is due to a 44 per cent surge in the Saudi Contract Price from $542 per tonne in March 2026 to $780 for April, as 20-30 per cent of global LPG supplies are stuck in the Strait of Hormuz.
“At current prices, OMCs are incurring an under-recovery of ₹380 per cylinder. Cumulative losses by the end of May will reach approximately ₹40,484 crore. Last year also, out of total losses of ₹60,000 crore, ₹30,000 crore were absorbed by Oil PSUs and ₹30,000 crore by the Government of India, in order to insulate the Indian citizen from high international LPG prices,” the Ministry had said.