Losses on domestic LPG sales incurred by oil marketing companies (OMCs) could decline by approximately 45% in FY26, provided crude oil prices remain around $65 per barrel, according to a recent report by CareEdge Ratings.
The report attributes the projected drop in under-recoveries to a combination of increased retail LPG prices and a decline in international LPG rates. “Cumulatively, the LPG under-recoveries are expected to decrease by around 45% in FY26 if crude oil prices remain around USD 65 per barrel,” the report noted.
Under-recoveries refer to the losses borne by OMCs when LPG cylinders are sold below cost, as government price controls aim to keep cooking gas affordable for households. In India, about 90% of LPG consumption is for domestic cooking, with the rest used in industrial, commercial, and automotive applications.
Domestic LPG usage has surged in the past decade, with the number of household consumers doubling to nearly 33 crore as of April 1, 2025. This sharp rise in demand has far outpaced the growth in domestic LPG production, forcing India to increase its reliance on imports. In FY25, imports accounted for roughly 60% of the country’s LPG needs, up from about 46% ten years ago.
In the same fiscal year, OMCs faced steep losses on LPG sales, with under-recoveries averaging nearly ₹220 per 14.2 kg cylinder. This resulted in a combined loss of ₹41,270 crore for the three major state-run oil firms, significantly impacting their bottom line. Their collective profit after tax (PAT) dropped to around ₹35,000 crore in FY25, down from approximately ₹85,000 crore in FY24.
To help ease the pressure, the government raised retail LPG prices by ₹50 per cylinder effective April 8, 2025. This move alone is expected to reduce under-recoveries by around 25% in FY26.
Adding to the relief, global LPG prices are also trending downward. The Saudi Contract Price — the international benchmark for LPG — fell in both March and May 2025, driven by weaker crude oil prices. CareEdge estimates that this decline could further reduce under-recoveries by an additional 20% in the upcoming fiscal year.
