The Under-recovery Gap Exists between What Consumers pay and What it costs.
NEW DELHI: On Saturday morning, India’s state-owned oil marketing companies raised the price of a 14.2 kg domestic LPG cylinder by ₹29, effective June 7. In Delhi the retail price moved from ₹913 to ₹942. In Kolkata it now stands at ₹968. The revision was the second in three months, following a ₹60 hike on March 7 triggered by the outbreak of the US-Iran military conflict and the subsequent blockade of the Strait of Hormuz. Predictably political reactions followed within hours. However the number that actually defines India’s cooking gas crisis is not on any front page.
The actual cost of importing, bottling, transporting and delivering a standard 14.2 kg cylinder to an urban household stands at between ₹1,600 and ₹1,700 as of June 2026. After this latest revision India’s oil marketing companies are still absorbing a confirmed loss of approximately ₹674 on every domestic cylinder sold. The ₹29 hike did not solve anything. It narrowed a structural wound that has been widening for two years.
What Is Actually Happening to OMC Balance Sheets
The trajectory of this under-recovery tells a more alarming story than any single price revision. In FY24, oil marketing companies were actually making money on domestic LPG. BPCL for instance generated a positive marketing buffer of up to ₹360 per cylinder in the second quarter of that year, as global crude benchmarks softened. That comfortable cushion has since been obliterated.
By FY25, under-recovery had reversed to an average of ₹220 per cylinder generating a combined loss of ₹41,338 crore across the three state-owned retailers. In FY26, with the West Asia conflict driving the Saudi Contract Price for LPG up by nearly 46 percent from 542.50 per metric tonne in February to 790 per metric tonne in June the cumulative under-recovery has escalated to an estimated ₹60,000 crore. Rating agency ICRA projects that figure could hit ₹80,000 crore in FY27 if current geopolitical tensions persist.
Despite this all three majors Indian Oil Corporation, BPCL and HPCL posted strong full-year profits for FY26, with IOCL recording a standalone net profit of ₹36,802 crore. The paradox is explained by refining. High global crack spreads and discounted crude procurement allowed upstream margins to offset the downstream haemorrhage. However that buffer is not guaranteed and global agencies are watching. S&P has flagged that prolonged elevated crude prices could weaken IOCL’s liquidity. Moody’s and Fitch have noted that OMC credit profiles face severe pressure if crude remains consistently above $100 per barrel.
The Hormuz Bottleneck and India’s Import Trap
The geopolitical trigger for this crisis is specific. On February 28, 2026, the US-Iran military conflict escalated into a shipping blockade along the Strait of Hormuz a narrow waterway that carries nearly 20 percent of the world’s energy supplies and between 20 and 30 percent of global LPG shipments. For India the disruption exposed a structural vulnerability that energy policy has long deferred addressing.
Of the 31.3 million metric tonnes of LPG consumed domestically in FY25, only 12.8 million tonnes were produced within India. The remaining 60 percent was imported and 85 to 90 percent of those imports originated from Gulf countries that depend entirely on Hormuz for shipping access. Consequently when Tehran closed that corridor India’s supply chain tightened almost immediately.
The storage infrastructure compounds this vulnerability. India maintains no meaningful strategic reserve for LPG. Total national LPG tankage provides approximately 15 days of consumption at the national level and just six days at regional bottling plants. Any prolonged Gulf disruption can translate into localised shortages within a week. That is not a policy buffer. It is an exposure.
Who Is Still Being Protected and at What Cost
The government’s position is clear and has been restated consistently: Indian households pay among the lowest cooking gas prices in the world. The data supports that claim. A comparable cylinder costs ₹1,046 in Pakistan, ₹1,207 in Nepal, ₹1,241 in Sri Lanka and ₹2,411 in Canada. Even after the June hike, a general consumer in Delhi pays nearly ₹700 below the market-linked cost of supply.
For the 10.56 crore households enrolled in the Pradhan Mantri Ujjwala Yojana, the effective price after the unchanged ₹300 direct benefit transfer remains ₹642, a 60 percent discount to actual supply cost. The government has confirmed there are no immediate plans to move domestic LPG to full market-linked pricing.
The fiscal cost of this protection is substantial. Energy policy assessments estimate that suppressing domestic LPG prices costs approximately 0.6 percent of GDP annually. To partially offset OMC losses, the government approved a ₹30,000 crore special compensation package in FY26. However the disbursement is structured in 12 monthly instalments, meaning only ₹12,500 crore was released within the fiscal year leaving OMCs to bridge the remaining ₹17,500 crore gap themselves.
The Quiet Unravelling of the Clean Cooking Transition
The price pressure is doing something that official data is only beginning to capture. In April 2026, domestic LPG consumption dropped 13 percent year on year partly attributed to supply disruption, but also to a phenomenon that energy researchers call fuel stacking. Rural households even those connected under PMUY are reverting to biomass fuels when refilling costs become prohibitive. The effective PMUY price of ₹642 sounds subsidised. Against the median rural income, it represents a meaningful monthly expenditure that competes with food and education costs.
National Family Health Survey data tells the structural story: while 89 percent of urban households use LPG as their primary cooking fuel, that figure falls to 49.4 percent in rural areas, where 46.7 percent of households still rely primarily on firewood, crop residue and other biomass. The clean cooking transition, in other words is fragile. Price shocks accelerate the retreat.
Meanwhile, the alternative infrastructure is not ready. Piped natural gas connections reached only 1.4 crore households as of early 2025, against a government target of 2.9 crore. Sunil Mani of the International Institute for Sustainable Development argues that diversifying toward urban electric cooking and decentralised rural biogas could yield cumulative subsidy savings of up to ₹2.4 trillion by 2050 while also reducing import dependency. Electric cooking already costs less annually than regulated LPG on an operating basis.
The ₹29 revision is not the story. The story is that India is selling a globally scarce, strategically critical imported fuel at roughly half its cost and has been doing so at growing scale for over two years. Sourav Mitra of Grant Thornton Bharat has noted that price freezes are “not sustainable beyond the near term.” The question is not whether that model changes. It is when and on whose balance sheet the adjustment lands.
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