Modi Govt to Give ₹35,000 to Fuel Companies; Check Reason Why

According to sources, state-owned Indian Oil Corporation Ltd. (IOC), Bharat Petroleum Corporation Ltd. (BPCL), and Hindustan Petroleum Corporation Ltd. (HPCL) are expected to get a ₹35,000 crore subsidy from the government. The amount is given to compensate them for the losses they suffered from the sale of the fuel this fiscal year.

Despite an increase in the cost of input raw materials, the three fuel merchants have maintained the price of domestic LPG at ₹803 per 14.2-kg cylinder since March 2024. This resulted in low LPG sales recoveries, which caused company earnings to plummet from April to September (the first part of the current fiscal year 2024–25).

Govt to Give 40,000 Cr as Fuel Subsidy

It is anticipated that the industry's overall under-recovery on LPG sales for the current fiscal year is approximately ₹40,500 crore. According to sources, the government is expected to contribute ₹35,000 crore in total over the course of two fiscal years.

IOC, BPCL, and HPCL are expected to receive ₹10,000 crore in the current fiscal year 2024–2025, with the remaining ₹25,000 crore to follow. They also stated that the subsidy will likely be included in the Union Budget for 2025–2026, which Finance Minister Nirmala Sitharaman is scheduled to submit on February 1.

No LPG Cylinder Price Hike

Government regulation of domestic LPG prices protects domestic households from exorbitant market prices. The international standard used to determine domestic LPG pricing, Saudi CP, is higher than the regulated prices. This is because local demand for LPG cannot be met by domestic supply, necessitating the importation of the fuel.

Domestic LPG prices haven't changed since they were lowered by ₹100 every 14.2-kg cylinder on March 9, 2024, right before the announcement of general elections.

Sources stated that the state-owned gasoline dealers offer 14.2-kg cylinders to domestic customers at the current price of ₹803, which represents an under-recovery (or loss) of almost ₹240.

Fuel sellers suffer losses as a result of under-recoveries.

Govt Reimbursements to Fuel Companies

The government occasionally reimburses IOC, BPCL, and HPCL for their losses. The three had earlier received pay of ₹22,000 crore for the fiscal years 2021–2022 and 2022–2023. This was in contrast to an under-recovery of ₹28,249 crore.

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