 "LPG")
The government will bear the burden of the Rs 200 price cut on domestic cooking gas cylinders, Petroleum and Natural Gas Minister Hardeep Singh Puri said on Wednesday, in a major relief to state-run oil marketing companies (OMCs).
Puri made this assertion, in an exclusive interaction with CNBC-TV18.
The Union Cabinet on Tuesday announced the LPG cylinder price cut to ease the load of inflation on consumers. The move, however, triggered panic among OMCs who were staring at losses to the tune of nearly Rs 7,500 crore.
India has a total of 314 million domestic LPG consumers, according to government data.
With the announced price cut, a domestic LPG cylinder in Delhi will now retail at Rs 903.
OMCs can expect a government grant soon to compensate for the latest price cuts in LPG cylinders, according to a government official.
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Even in the absence of a grant, analysts point out that losses in the LPG segment are unlikely in the offing, as propane prices have fallen since the last hike in LPG retail prices.
State-run OMCs – Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) are the three main sellers of LPG cylinders in the country.
“The three state-owned OMCs will be compensated with a one-time grant to make up for potential losses incurred as a result of the latest LPG price cut,” the government official said.
“Discussions on the size of the grant will take place soon,” the official said.
In October 2022, the government approved a one-time grant of Rs 22,000 crore to the three OMCs.
The Centre argued that the payment would help the OMCs ensure unhindered domestic LPG supplies.
Officials from the three companies did not offer any comment on the development.
The stocks of all three OMCs took a hit during Wednesday’s trade.
HPCL’s shares closed 2.44 per cent lower, BPCL was 1.39 per cent down, while IOC fell by 1.18 per cent from the previous day’s close.
Analysts tracking these OMCs, however, do not expect any price-change related major losses to be incurred for the LPG segment at the prevailing propane prices.
More than 60 per cent of India’s LPG needs are met through imports, of which propane is an important component.
“Saudi Contract prices for propane is at $385, which will move up to $470 September onwards and another hike is expected of $560-570 October onwards. At the current propane prices, there will be no losses,” said an oil and gas analyst.
“The previously held high LPG prices have left OMCs with a significant surplus, which will support even the October propane price levels,” the analyst added.
Prices of 14.2 kg domestic LPG cylinders had last seen a price hike in March this year, when it was raised by Rs 50. Before this, prices were raised back in July, 2022.
