Oil companies losses on LPG expected to decrease by around 45% in FY26 if crude prices remain at $65 per barrel: Report

LPG losses incurred by oil marketing companies (OMCs) are expected to decrease by around 45 per cent in FY26 if crude oil prices remain stable at $65 per barrel, according to a report by CareEdge Ratings.

The report stated that the cumulative LPG under-recoveries are likely to reduce significantly next fiscal year, mainly due to a mix of higher retail prices and lower international LPG prices. It said “Cumulatively, the LPG under-recoveries are expected to decrease by ~45 per cent in FY26 if crude oil prices remain around $65/bbl”. These under-recoveries refer to the losses suffered by oil companies when they sell LPG cylinders below their cost price, as prices are regulated by the government to keep cooking gas affordable for households.

In India, around 90 per cent of LPG consumption is used for household cooking, while the remaining 10 per cent is used in industrial, commercial, and automotive sectors.Over the last ten years, the number of domestic LPG consumers has doubled, reaching approximately 33 crores as of April 1, 2025. The report mentioned that due to this sharp rise in consumers, LPG consumption has grown faster than domestic production. Indian refiners have not increased LPG output enough to meet demand, leading to a greater reliance on imports.

In FY25, around 60 per cent of the domestic LPG requirement was met through imports, compared to about 46 per cent a decade ago. In FY25, oil marketing companies suffered significant LPG under-recoveries of nearly ₹220 per 14.2 kg cylinder. This resulted in a total loss of ₹41,270 crore for the three major OMCs combined, putting pressure on their profitability. As a result, the combined profit after tax (PAT) of these companies fell from about ₹85,000 crore in FY24 to ₹35,000 crore in FY25.

However, the recent hike in retail LPG prices by ₹50 per cylinder, effective from April 8, 2025, is expected to reduce under-recoveries by 25 per cent in FY26.In addition, international LPG prices are also likely to soften, as the Saudi Contract Price, the global benchmark for LPG, has declined in March and May 2025.This fall, driven by lower crude oil prices, may further reduce under-recoveries by around 20 per cent in FY26, the report added.

Published on May 17, 2025