Cabinet approves ₹30,000 crore compensation for PSU oil marketing firms

The Cabinet approved ₹30,000 crore compensation for IOCL, BPCL and HPCL to cover domestic LPG losses, ensuring affordable supply and financial stability for PSU oil firms

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a compensation package of ₹30,000 crore for three public sector oil marketing companies -- Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) -- to cover losses from the sale of domestic liquified petroleum gas (LPG).

 

According to a government statement, the Ministry of Petroleum and Natural Gas will allocate the compensation among the companies, which will be disbursed in 12 instalments.

 

Public sector OMCs supply domestic LPG cylinders at regulated prices. During 2024-25, international LPG prices remained high, but the government did not pass on the increased costs to consumers. This led to significant under-recoveries for the three firms. Despite these losses, IOCL, BPCL and HPCL continued to supply LPG to households at affordable rates.

   

The government said the compensation would help the companies meet essential needs such as crude and LPG procurement, debt servicing, and maintaining capital expenditure. This, it added, would ensure uninterrupted domestic LPG supply across India.

 

The decision reflects the government’s commitment to shielding consumers from global energy price volatility while safeguarding the financial health of PSU oil firms. It also reinforces the goal of providing clean cooking fuel to all domestic LPG users, including those under flagship schemes like the Pradhan Mantri Ujjwala Yojana.

Jet fuel prices up, commercial LPG rates down

Meanwhile, aviation turbine fuel (ATF) prices were raised by nearly 3 per cent on Friday, while commercial LPG cylinder rates were reduced by ₹33.50, in line with changes in international benchmark prices.

 

In Delhi, ATF rates rose by ₹2,677.88 per kilolitre (2.9 per cent) to ₹92,021.93 per kl, according to state-owned fuel retailers. This follows a steep 7.5 per cent hike last month, adding further pressure to airline operating costs.

 

Jet fuel prices had been reduced for three consecutive months from April, amounting to a total cut of ₹12,239.17 per kl. However, the increases in July and August -- totalling ₹8,949.38 per kl -- have erased almost three-fourths of those earlier gains.

 

The price rise is linked to higher international oil rates, driven by geopolitical tensions and trade disputes. Fuel accounts for almost 40 per cent of an airline’s operating expenses, meaning the hike will likely affect its cost structure.