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Oil PSUs Face Rs 53,700 Cr LPG Losses—Govt Subsidy Covers Only 56%

Oil marketing companies are facing massive financial pressure with LPG under-recoveries reaching Rs 53,700 crore. The government plans to provide Rs 30,000 crore in subsidies through 12 monthly installments starting November 2025. However, this subsidy covers only about 56% of the existing losses, leaving a significant financial gap. With winter price hikes expected to increase under-recoveries further, OMCs continue to face challenging financial conditions.

Key Points: Oil PSUs LPG Losses Rs 53700 Cr Govt Subsidy Rs 30000 Cr

  • LPG under-recoveries hit Rs 53,700 crore for oil marketing companies
  • Government to provide Rs 30,000 crore subsidy in 12 monthly installments
  • Subsidy covers only 56% of current losses, gap expected to widen
  • Winter price hikes likely to increase under-recoveries further
  • OMCs face pressure from elevated capex and infrastructure projects
  • City gas distribution companies may see valuation de-rating
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Oil PSUs LPG losses stands at Rs 53,700 cr, likely to get Govt subsidy of Rs30,000 cr: Report

Oil marketing companies face Rs 53,700 crore LPG losses with government subsidy covering only 56%. Financial gap expected to widen despite support.

"OMCs are likely to get LPG subsidy of Rs300bn in 12 tranches from the government versus cumulative under-recoveries of ~Rs 537bn at end-Sep'25 - Nuvama Research Report"

New Delhi, November 20

Oil Marketing Companies (OMCs) continue to face heavy financial pressure from LPG under-recoveries, even as the government prepares to release subsidies over the coming months, highlighted a report by Nuvama Research.

According to the report, LPG-related losses for OMCs currently stand at Rs 53,700 crore. The companies are likely to receive LPG subsidy of Rs300 bn (Rs 30,000 crore) in 12 tranches from the government, compared with cumulative under-recoveries of around Rs 537 bn (Rs53,700 cr) at the end of September 2025.

The report stated "OMCs are likely to get LPG subsidy of Rs300bn in 12 tranches from the government versus cumulative under-recoveries of ~Rs 537bn at end-Sep'25".

The equal monthly instalments are scheduled to start from November 2025, and the receipts will be accounted for directly as revenue.

However, the report cautioned that under-recoveries are expected to increase further. Regional LPG prices typically rise during the winter season, and the declared subsidy covers only about 56 per cent of the existing cumulative losses.

This means the financial gap for OMCs is likely to widen despite the subsidy support.

LPG under-recovery refers to the financial loss incurred by OMCs when the cost of importing or sourcing LPG is higher than the retail price offered to consumers. This gap is compensated partly by government subsidy, but the current levels remain insufficient to cover the full burden.

The report also noted that OMCs capex is expected to remain elevated due to long-gestation infrastructure projects. This is likely to put pressure on their return ratios in the near term.

The report added that city gas distribution (CGD) company valuations may see de-rating, as the sector continues to face uncertainty amid ad-hoc government policies.

On the upstream side, the report said ONGC's production guidance appears optimistic, given that the company has failed to meet its targets for the last seven years.

It also remains cautious on GAIL due to weak demand conditions and persistent volatility in its marketing earnings.

Overall, the report highlighted rising challenges for the oil and gas sector, with subsidy support offering only partial relief amid mounting under-recoveries and sector-wide uncertainties.

- ANI

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Reader Comments

P
Priya S
As a middle-class household, we're already struggling with LPG cylinder prices. If OMCs are facing such huge losses, will prices increase further? Government should ensure affordable cooking gas for common people. This affects millions of families like mine.
A
Arjun K
The Ujjwala scheme was a great initiative, but sustainable pricing is crucial. Maybe time to promote alternatives like solar cookers and biogas in rural areas? We can't keep subsidizing forever. Good analysis by Nuvama though. 👍
S
Sarah B
Working in the energy sector, I see this as a structural issue. OMCs need better risk management and hedging strategies for international LPG prices. The 12-tranche subsidy approach seems practical, but long-term solutions are needed.
V
Vikram M
₹53,700 crore loss is massive! While subsidy helps, what about operational efficiency? Public sector companies need to improve their performance metrics. Hope the government ensures accountability along with financial support.
M
Michael C
The timing of this report is interesting - just before winter when demand peaks. Smart move by the government to release subsidies in tranches, but the widening gap is worrying for investors in these companies.

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