Center will compensate LPG deficit – Center will compensate lpg deficit –

India’s favorite LPG fuel can provide relief to common people. The Narendra Modi government is considering giving a lump sum subsidy to the oil marketing companies (OMCs) in the coming months, so that their increasing deficit can be compensated. People involved in internal conversation on this issue gave this information.

Two sources involved in high -level discussion said that the Central Government could compensate for a remarkable part of the loss of Rs 40,000 crore to the OMC by selling LPG (LPG). The Center has not allocated funds to make up for record deficit in the budget presented on 1 February this year. Sources associated with the market hope that the government can pay from Rs 18,000 to 25,000 crore in the middle of the year. Refining sources and equity analysts said that government refiners could face financial pressure if this is not done.

The top officials involved in the meeting including Union Petroleum and Natural Gas Minister Hardeep Puri are confident of compensating the OMC deficit by the government. Sources said that no fixed amount was promised. He said that the Finance Ministry will decide about the amount and the method of its payment. Puri had expected LPG compensation in the Union Budget in a conversation with reporters after a meeting in Mumbai last month.

Vice President Prashant Vashisht in Moody’s rating agency Ecra said, “Our estimate is Rs 38,000 to 40,000 crore for the whole year and the deficit will remain the same in the next financial year.” He also warned that if the exemption on Russian oil is exhausted, tax, depreciation and refinement in the next financial year will cost an additional burden of 16,000 crores on the income before the interest of the refining sector. Analysts said that Indian Oil Corporation, Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation are not in a position to compensate for a loss of Rs 80,000 crore during the 2 financial year, especially in a situation when 2025 according to budget documents. The commitment of capital expenditure for -26 has increased to Rs 65,000 crore.

According to the company’s data, the total under -recovery during April to December was less than Rs 29,000 crore. In October 2022-23, the Center provided Rs 22,000 crore after not making budget provisions in October 2022-23.

Dependence on import

The US President Donald Trump’s fee war with China may increase fuel prices this year if China imposes the US supply. This also happened in the 2018 trade war. Because of this, petrochemicals plants may have to compete for suppliers in West Asia.

India is dependent on 67 percent imports for its LPG needs. Its entire dependence on West Asia has made Saudi Arabia sensitive to the monthly contract value (CP). In 2024, 213 lakh tonnes of propane and butane were imported from Gulf countries for mixing LPG. The United Arab Emirates is the largest supplier. It is followed by Qatar, Kuwait and Saudi Arabia. Saudi CP is kept benchmark in the terms of everyone’s contract. America is a large supplier of gas, but the cost of transportation is a big challenge. However, Trump is exercising to increase fuel exports from the US, under which more supply can be made to India. India’s Oil Ministry hopes that the consumption of LPG may increase by 4.8 percent to 330 lakh tonnes next financial year, which will further increase the dependence on exports and will suffer financial losses due to domestic production being stable.

First Published – February 17, 2025 | 11:17 pm IST

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