Govt to Fully Bail Out OMCs: BPCL, HPCL, IOCL to Get Rs 40,000 Crore LPG Loss Compensation

  • The government has announced that state-run oil marketing companies (OMCs) — BPCL, HPCL, and IOCL — will receive full compensation for losses exceeding Rs 40,000 crore incurred in FY24 due to subsidized LPG sales.

  • Petroleum and Natural Gas Minister Hardeep Singh Puri assured there is "100% certainty" that the finance ministry will release the compensation in full, ending months of uncertainty for these companies.

  • The losses stemmed from keeping LPG cylinder prices artificially low for consumers, especially beneficiaries of the PM Ujjwala Yojana, despite international LPG prices surging by over 60% in 2023–24.

  • While the effective price for PMUY consumers in Delhi was maintained at Rs 503 per cylinder, the actual market-linked price soared above Rs 1,050, forcing OMCs to absorb the difference.

  • This move is expected to significantly improve the financial health and balance sheets of BPCL, HPCL, and IOCL, which have faced volatile profits due to price freezes and rising crude benchmarks.

  • The decision comes after previous support packages, including a Rs 22,000 crore payout in 2022, were deemed insufficient as under-recoveries continued to mount.

  • A meeting of the Expenditure Finance Committee recently discussed the compensation framework, with the proposal now moving towards cabinet approval.

  • The timely compensation is seen as critical for stabilizing OMC operations and boosting investor confidence, especially as the sector continues to face global price volatility.

  • The government’s intervention underscores the political sensitivity of LPG prices in India, even as petrol and diesel have been deregulated.

  • With this assurance, the focus now shifts to the finance ministry for swift disbursal, which could provide much-needed relief to both the companies and their shareholders.

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