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LPG under-recovery
What it is
The gap between the cost of imported LPG and the subsidised price at which domestic cooking gas cylinders are sold, borne in the first instance by the oil marketing companies
Unlike petrol and diesel, LPG remains effectively administered for household consumers, so under-recoveries accumulate until the government compensates - which has been irregular and is a standing budget request from the sector
Impact on industries
- A direct, uncompensated drag on OMC earnings and cash flow, with the quantum set by import prices and the exchange rate rather than by any operating decision
- Compensation timing is discretionary, so the receivable sits on the balance sheet and distorts profit between the year of loss and the year of payment
- Concentrates in PSU marketers, as private refiners stayed out of subsidised LPG retailing; US sourcing alongside West Asia cuts concentration risk
- India holds ~45 days of LPG stock, which buffers short disruptions but not a sustained price shift