The under recovery on LPG of the PSU oil marketing companies (OMCs) rose roughly 5 per cent on a monthly basis to more than ₹62,000 crore in August 2026 as retailers continue to sell the critical cooking fuel at below market rates.
The under-recovery was around ₹721 per cylinder in June, which fell to roughly ₹500 a cylinder a month later. The under recovery per cylinder stood at about ₹188 in August, which has risen now to roughly ₹210 a cylinder in the current month.
The cumulative under recovery of PSU OMCs rose from roughly ₹51,000 crore in June to over ₹62,000 crore last month. PSU OMC losses ballooned due to selling LPG below international prices, which surged significantly after February 28, 2026 due to the West Asia conflict and closure of the Strait of Hormuz (SoH).
Prior to the outbreak of conflict, India used to import about 60 per cent of its LPG consumption, out of which about 90 per cent was transiting the SoH.
India’s LPG imports rose to a six month high of 1.3 million tonnes (mt) in August, growing by roughly 50 per cent month-on-month. However, the cargoes were down by almost 33 per cent on an annual basis.
A back of the envelope calculation shows that for $1 million, India procured roughly 1.65 tonnes of LPG in August 2026, which is roughly the same rate during March 2026. During April, around 1.39 tonnes of LPG was procured for $1 million.
Supply disruptions
However, the quantity fell as supply disruptions in the SoH completely choked off LPG supply during May and June. For instance, India paid $1 million to procure around 1.17 tonnes and 1.18 tonnes of LPG in May and June, respectively.
The US was India’s top supplier last month. India imported about 0.62 mt LPG from the US in August, after bringing in 0.89 mt in July, OPEC data showed.
Washington, which was India’s fifth largest LPG supplier till January 2026, jumped a spot to become the fourth largest, replacing Kuwait a month later. Fresh conflict in West Asia (from February 28) propelled the North American country to become the top supplier for five consecutive months, beginning March.
However, this diversification has come at a cost.
Longer voyages
The US LPG is linked to Mont Belvieu prices ($0.68 per gallon in August 2026, equivalent to around $360 per tonne) which is generally benched lower than Saudi CP, but longer voyages to India raises its delivered cost, Equirus Securities pointed out.
“Houston–Asia VLGC freight exceeded $200 per tonne mark in mid-April 2026 and continued to rise to more than $300 in August as stronger eastbound demand tightened vessel availability. Consequently, US-to-Asia LPG flows declined from around 4.8 mt in July to roughly 4.2 mt in August and are estimated to fall further to 3.6 mt in September,” the brokerage added.
Meanwhile, constrained regional supply pushed Saudi Arabia’s September propane contract price up by $5 per tonne to $625. Higher sourcing costs are expected to continue to accumulate with Indian oil marketing companies (OMCs), it noted.