As state-owned oil companies grapple with massive losses from selling LPG below cost, the Govt is set to allocate Rs 35,000 crore in subsidies to mitigate the financial burden
During the current financial year (FY) 2024-25, the state-owned Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) are expected to incur an under-recovery of Rs 19,550 crore, Rs 10,400 crore and Rs 10,570 crore respectively on sales of LPG to household consumers. To make up for this loss totalling Rs 40,500 crore, the Union Government is likely to provide a subsidy of Rs 35,000 crore. In the Budget for 2025-26, to be presented on February 1, 2025, Finance Minister Nirmala Sitharaman will make a provision of Rs 10,000 crore in the revised estimate (RE) for the current FY and the remaining Rs 25,000 crore in the budget estimate (BE) for 2025-26.
The under-recovery arose because these corporations sold LPG for Rs 803 per 14.2-kg cylinder against the cost of supplying at the retail point being higher. The cost is calculated as the refinery-gate price or RGP (taken as import parity price or IPP and export parity price or EPP in the ratio of 80:20) plus freight, marketing costs, marketing margin, dealers’ commission, and taxes and duties. During the current FY, the cost is Rs 1043 per cylinder, and the loss is Rs 240 per cylinder which on total sales of 169 crore cylinders would be Rs 40,500 crore. Modi – government had stopped giving subsidies on LPG during FY 2021-22. Then, how come, it continues to make huge payments from the budget? LPG is an environment and human-friendly fuel that meets the needs of millions of households (HHs).