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To bolster oil marketing companies (OMCs) and shield citizens from high prices in the face of geopolitical upheavals, the Centre on Friday approved a ₹30,000 crore compensation for LPG under recoveries in FY25 and ₹12,000 crore as subsidy to continue providing Ujjwala consumers with affordable liquefied petroleum gas (LPG) cylinders in FY26.
The Cabinet on Friday cleared the Oil Ministry’s proposal to compensate the three state-run OMCs — Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) — with ₹30,000 crore for under recoveries in domestic sale of LPG. India imports 60 per cent of its domestic LPG requirement.
This was done as the OMC sold LPG cylinders to domestic consumers at affordable rates despite high international prices. For comparison, the average Saudi CP (international benchmark for LPG pricing) rose by 51 per cent between July 2023 to June 2025, while the effective price for the PMUY consumers was reduced by 38 per cent from August 2023 to July 2025.
Cumulatively, the OMCs incurred under recovery of around ₹41,700 crore in FY25, which amounts to roughly ₹220 per 14.2 kg cylinder. As per CareEdge, under recoveries exerted pressure on OMC profits, which reflects in lower profits of around ₹35,000 crore in FY25 from roughly ₹85,000 crore in FY24.
“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,” the Oil Ministry said.
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, it emphasised.
Ujjwala Subsidy
Separately, the Cabinet approved the targeted subsidy of ₹300 per 14.2 kg cylinder for up to 9 refills per year to the PMUY beneficiaries in FY26 at an expenditure of ₹12,000 crore.
To shield PMUY beneficiaries from the impact of sharp fluctuations in international prices of LPG and to make LPG more affordable in a bid to ensure sustained use of LPG, the government started a targeted subsidy of ₹200 per 14.2 kg cylinder for up to 12 refills per annum for PMUY consumers in May 2022. In October 2023, it increased the subsidy to ₹300.
The government’s efforts are bearing fruit. For instance, the Average Per Capita Consumption (PCC) of PMUY consumers, which was only about 3 refills in FY20 and 3.68 refills in FY23, has improved to about 4.47 refills in FY25.
Around 90 per cent of the LPG is consumed by households. India has around 33 crore domestic LPG consumers, which includes about 10.33 crore Pradhan Mantri Ujjwala Yojana (PMUY) consumers.
Published on August 8, 2025
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