The latest increase in domestic LPG prices offers only limited relief to state-run oil marketing companies, with the Petroleum Ministry saying public sector retailers continue to absorb an under-recovery of about Rs 700 on every 14.2-kg cylinder sold to households.
Effective Sunday, the price of a domestic LPG cylinder in Delhi has been raised by Rs 29 to Rs 942, with corresponding revisions in other markets.
Following the price hike, India’s oil ministry said the import-linked cost of supplying the same cylinder has risen to over Rs 1,600, leaving a large gap between the regulated retail price and the market cost.
For India Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, the issue is not just a household price revision.
These companies sell domestic LPG at regulated prices, while international prices and import costs move with global benchmarks. When the full cost is not passed on to consumers, the gap shows up as under-recovery on their books, partly compensated by the government.
Why OMCs remain under pressure
The Petroleum Ministry said the Saudi Contract Price, the international benchmark used for LPG pricing, has risen sharply since the West Asia disruption.
The 50:50 propane-butane LPG blend stood at $542.50 per tonne in February, rose to $775 per tonne in April and reached $790 per tonne in June.
This marks an increase of about 46% from the pre-disruption February level, according to the ministry.
Domestic LPG, unlike commercial LPG, is not fully passed through to consumers every month.
Commercial cylinders used by hotels and businesses are revised in line with the international benchmark, but household cooking gas prices are softened by the government.
That is why the latest Rs 29 increase does not close the gap for OMCs despite following an earlier Rs 60 increase on March 7.
Together, domestic LPG prices have risen by Rs 89 per cylinder since March, but the ministry’s estimate of under-recovery remains around Rs 700 per cylinder.
The financial strain has been building for some time. According to the Petroleum Ministry, cumulative under-recovery on domestic LPG stood at Rs 41,338 crore in FY25 and rose to Rs 60,000 crore by the end of FY26.
The Union Cabinet had approved Rs 30,000 crore in compensation to public sector OMCs for domestic LPG under-recoveries, to be paid in tranches.
In its earlier Cabinet note, the government had said this compensation would help OMCs meet critical requirements such as crude and LPG procurement, debt servicing and capital expenditure, while ensuring uninterrupted LPG supply to households.
Consumer cushion, company burden
The government’s position is that the price increase has been calibrated to protect households from the full impact of global energy volatility.
The ministry said a general consumer in Delhi will pay Rs 942 per 14.2-kg cylinder, while a Pradhan Mantri Ujjwala Yojana beneficiary will pay an effective Rs 642 on the first four refills in a year after a direct benefit transfer of Rs 300 per cylinder.
The ministry also said non-PMUY households are still paying about Rs 700 below the market-linked cost of LPG. Retail prices can vary marginally across locations because of distribution costs.
This creates a two-layer support structure. The first is the under-recovery, which is the gap between the international cost and the regulated retail price. This is absorbed by public sector OMCs and partly compensated by the government. The second is the direct subsidy given to Ujjwala beneficiaries.
Brief timeline
The pressure on LPG pricing intensified after the West Asia crisis and disruption around the Strait of Hormuz. The ministry said India used to import around 60% of its LPG requirement, with landed cost linked to the Saudi Contract Price.
On March 7, domestic LPG prices were raised by Rs 60 per cylinder. On June 7, prices were raised again by Rs 29 per cylinder, taking the Delhi price to Rs 942. Over the same period, the Saudi CP benchmark continued to remain elevated, keeping OMC under-recoveries high.
Supply steps
The Petroleum Ministry said domestic LPG production was raised by more than 60%, from about 32 thousand tonnes to about 52 thousand tonnes, to offset constrained imports. It also said sourcing was widened to suppliers outside the Strait route, including the United States, Canada and Algeria.
On the demand side, consumers were encouraged to shift to piped natural gas where available. The ministry also said OTP-based delivery verification was increased to around 90% to check diversion of subsidised domestic LPG into the commercial market.
For OMCs, the latest price hike is therefore a partial adjustment, not a full reset. Unless international LPG prices cool meaningfully or government compensation increases, the gap between consumer affordability and company finances is likely to remain the key pressure point.
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