Indian oil marketing companies like Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp., all saw an increase in their LPG losses in the second quarter of fiscal 2025.
These under-recoveries impacted the companies' earnings further in an already weak refining environment.
While the street expects government to compensate for the losses, no budgetary allocations have been made for the same.
Estimated Loss For FY25
In June quarter this fiscal, oil marketing companies made losses on their LPG sales in the range of Rs 2,000 crore to Rs 4,100 crore. In the second quarter, this range stood between Rs 2,000 crore and Rs 3,700 crore. While the range of losses did contract in the September quarter, it is key to note that demand for petroleum products remained low, owing to the heavy monsoon season.
Based on the cumulative LPG losses reported by the companies in the first half of fiscal 2025, Bharat Petroleum, Hindustan Petroleum, and Indian Oil are currently making an average monthly loss of Rs 680 crore, Rs 710 crore, and Rs 1,470 crore, respectively on LPG.
Based on this run-rate, Indian oil marketing companies, could make an annual loss on LPG sales somewhere between Rs 8,200 crore and Rs 17,700 crore, as per NDTV Profit calculations. This could be even higher as Emkay notes that LPG losses could be rise due to winter-driven demand.
Why Oil Firms Are Losing Money On LPG Sales
The Ministry of Petroleum and Natural Gas of India regulates the sale of LPG. Companies like Bharat Petroleum Corp., Hindustan Petroleum Corp., and Indian Oil are currently selling LPG cylinders at a subsidised rate, at a selling price that is below the cost of the product.
Government Support?
Brokerages were highly anticipating some kind of government support to the oil companies in the Union Budget 2024. However, expense allocations by the central government to the Petroleum Ministry did not include any provisioning for reimbursing the oil marketers for losses suffered on sale of LPG.
While companies are anticipating some kind of support soon, the timing of the compensation remains unknown, and thus, the companies will continue to bear losses—which will have an overall impact on their bottom-lines.
As per the second quarter concall, Hindustan Petroleum has taken this issue up with the government. The company noted how LPG prices need a hike of Rs 200 per cylinder in order to reach zero under-recovery.
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