OMCs stare at significant losses on domestic LPG sales; govt likely to take a fiscal hit on compensating OMCs

The Finance Ministry is likely to see a significant fiscal hit on India’s oil maths going haywire due to the war in West Asia.

As things stand today, the Oil Marketing Companies are incurring under-recoveries of ₹380/domestic LPG cylinder, the Ministry of Petroleum said. According to the Ministry, this may translate into cumulative losses of approximately ₹40,484 cr by the end of May this fiscal.

Last fiscal year, the finance ministry compensated OMCs to the tune of ₹30,000 cr out of total losses of ₹60,000 cr incurred by the OMCs on the sale of subsidised domestic LPG, the Petroleum Ministry said.

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OMCs have increased the commercial LPG cylinder price for the second time since the war began but refrained from doing so for domestic LPG.

The Petroleum Ministry said, "The April 1 price increase in Commercial cylinder price is due to a 44% surge in the Saudi Contract Price: from $542/MT in March to $780/MT for April, as 20-30% of global LPG supplies are stuck in the Strait of Hormuz."

On March 27, the finance ministry cut the excise on the sale of petrol and diesel by ₹10/litre each. This is likely to cause a net revenue loss of ₹5500 cr to the exchequer every fortnight, CBIC had said, after factoring in the revenue gain of ₹1500 cr every fortnight on the levy of export duty on ATF and diesel.

The export duties will be reviewed every 14 days.