LPG relief of ₹30,000 crore not enough to cover losses, but offers some cushion: HDFC Securities

The government’s ₹30,000 crore liquified petroleum gas (LPG) compensation for oil marketing companies (OMCs) will be paid in two tranches, but analysts say it is not enough to cover last year’s losses.“This ₹30,000 crore is not sufficient to compensate for last year’s under-recoveries of ₹41,300 crore,” said Nilesh Ghuge, Institutional Analyst at HDFC Securities. He added that the amount is “not adequate, but is slightly positive” as it still provides some relief.

OMCs continue to make losses of ₹165–₹170 per subsidised LPG cylinder in the financial year 2025-26 (FY26) so far. Ghuge expects the government may offer further support in the future, not through direct subsidies but possibly by adjusting marketing margins.

Also Read | HPCL, BPCL, Indian Oil get relief on LPG under-recoveries — Check analysts top picks
Recent developments may help reduce underrecoveries. On April 8, the Ministry of Petroleum raised LPG cylinder prices by ₹50, and Saudi benchmark LPG prices have dropped from about $630 in December–January to around $430 now. “These two, three things will help oil marketing companies to cut under-recovery in 2025-26,” Ghuge said.On petrol and diesel, the marketing margin is estimated at ₹8–₹10 per litre, with OMCs expected to continue earning “decent” margins. Hindustan Petroleum Corporation Ltd’s (HPCL) recent capacity expansion is also likely to lift EBITDA and PAT.

Also Read | ₹30,000cr LPG loss payout to OMCs in 12 tranches; Ujjwala Cylinder cap cut to 9: Cabinet Decisions

In the broader oil and gas sector, Ghuge said city gas distribution (CGD) companies remain more attractive. “In CGDs, I prefer Mahanagar Gas Ltd (MGL) over Indraprastha Gas Ltd (IGL),” he added.

For the full interview, watch the accompanying video

Catch all the latest updates from the stock market here