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Oil marketing companies to get Rs 22,000 crore one time compensation on LPG

economy | Oct 12, 2022 10:54 AM IST

Oil marketing companies to get Rs 22,000 crore one-time compensation on LPG

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The Union Cabinet has approved a one-time compensation with an outlay of Rs 22,000 crore to oil marketing companies on LPG cooking gas, sources tell CNBC-TV18.

The Union Cabinet has approved a one-time compensation to oil marketing companies on LPG cooking gas to help them tide over the gap as a result of under-recoveries on LPG, the Information and Broadcasting Ministry announced on Wednesday, confirming the CNBC-TV18 newsbreak.

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The move comes as LPG prices have not been changed in tandem with cost. The one-time grant to OMCs, which has an outlay of Rs 22,000 crore, will reflect in supplementary demands for grants, the government said.
I&B minister Anurag Thakur noted that the international prices of LPG rose 300 percent between June 2020 and June 2022 but the increased cost was not fully passed on to consumers, even as domestic LPG prices rose by 72 percent during this period.
"OMC's suffered significant losses between 2020-22 and therefore the government is making a one time grant to three OMCs," he said.
Shares of state-run OMCs — Indian Oil Corporation, Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) — ended in the green.
While the rates of commercial LPG cylinders were revised earlier this month, rates of LPG used in household kitchens for cooking purposes remained unchanged at Rs 1,053 per 14.2-kg cylinder. This is because the rates of domestic cooking gas were way lower than cost, and now with a drop in international prices, they are at breakeven, industry sources told PTI.
The cost of a domestic cylinder (14.2 kg) has been unchanged since a hike of Rs 50 on July 6. Before that, the prices for domestic cylinders were revised on May 19, 2022.
According to recent reports, state-owned oil marketing companies Indian Oil Corporation, Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) may, for the first time, post loss for the second consecutive quarter with a combined loss of Rs 21,270 crore in July-September, on holding petrol and diesel prices below the cost of production.
The three state-owned firms — IOC, BPCL and HPCL, in the first quarter of the current fiscal year (April-June) posted a combined loss of Rs 18,480 crore due to erosion in the marketing margin on petrol, diesel and domestic LPG.
ICICI Securities, in a report last week, said, "The three oil marketing companies IOC, BPCL and HPCL remain trapped in the quagmire of weak marketing losses, and there is not enough traction in refining margins."
The three firms are to announce second-quarter earnings later this month or in early November.
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