As Indian Oil Corporation (IOC) accounts for 50% of the total LPG under-recovery with ₹8,870 crore for FY25, the firm will be the biggest beneficiary if the Finance Ministry approves compensation for LPG under-recovery.
How much under-recovery of HPCL and BPCL
Hindustan Petroleum Corporation Limited (HPCL)’s under-recovery in the first half of its financials is ₹4,500 crore and Bharat Petroleum Corporation Limited‘s (BPCL) is ₹4,120 crore.
The oil ministry has demanded ₹25,000 crore as compensation for LPG under-recovery and the issue was to be discussed in the administrative ministry.
With LPG prices still managed, OMCs have a case to recover.
In recent investor calls, both IOC and HPCL reiterated their expectation for government support, saying, “Since LPG is a regulated product, we expect the government to compensate for the under-recovery.”
The Petroleum Ministry had told oil companies in April 2020 that if the market-determined price of an LPG cylinder is lower than the effective price for the consumer, the OMCs would maintain the difference in a separate buffer account for future adjustments.
Currently, all OMCs have a negative buffer on domestic LPG cylinders as the retail price/effective price to the consumer is lower than the market-fixed price and there is no pass-through from higher international LPG prices.