Oil Marketing Companies to Cut LPG Losses by 45% in FY26

Oil marketing companies (OMCs) in India are on track to slash LPG losses by approximately 45% in fiscal year 2026, provided stable crude oil prices at $65 per barrel, a CareEdge Ratings report reveals. The projected decrease is attributed primarily to increased retail pricing combined with lower international LPG prices.

The report indicates that these LPG under-recoveries are the financial hits sustained by oil companies due to government-regulated LPG pricing, which mandates selling below cost to maintain household affordability. With nearly 90% of LPG consumption dedicated to household cooking, any fluctuation significantly impacts the market.

The report further highlights a surge in domestic LPG consumption, outpacing production due to a consumer base doubling over the past decade to reach 33 crore by April 2025. This consumption rise has increased import dependency, with imports comprising 60% of domestic needs in FY25, up from 46% a decade prior.

In FY25, the financial toll on OMCs was severe, with under-recoveries hitting Rs 220 per 14.2 kg cylinder, culminating in combined losses totaling Rs 41,270 crore. This led to a sharp decline in the profit after tax from Rs 85,000 crore in FY24 to Rs 35,000 crore in FY25.

To counteract these losses, a recent Rs 50 per cylinder retail price hike, effective April 8, 2025, is anticipated to cut under-recoveries by 25% in FY26. Moreover, a potential drop in international LPG prices, mirrored by a decline in the Saudi Contract Price, suggests further under-recovery reduction by 20% in FY26.

(With inputs from agencies.)