Cabinet Approves ₹30,000 Crore Subsidy for Oil Firms to Offset LPG Losses
The Union Cabinet has approved a ₹30,000 crore subsidy for state-run oil marketing companies (OMCs) to compensate for losses incurred by selling domestic LPG below international market prices. The compensation for Indian Oil, BPCL, and HPCL aims to ensure their financial stability and maintain uninterrupted fuel supply. Additionally, the Cabinet cleared ₹12,060 crore in support for the Pradhan Mantri Ujjwala Yojana for 2025-26, continuing the ₹300 per cylinder subsidy for over 10 crore beneficiary households.
Unpacked:
The government chose not to pass on increased international LPG prices to consumers to ensure affordable access to clean cooking fuel and protect households from global energy price volatility. This policy supports social welfare objectives and avoids burdening millions of families, particularly during periods of high global fuel prices.
The ₹30,000 crore compensation will be allocated by the Ministry of Petroleum and Natural Gas among Indian Oil, BPCL, and HPCL. The funds will be disbursed in 12 instalments, helping the companies cover procurement, debt servicing, and capital expenditure needs.
The Pradhan Mantri Ujjwala Yojana is a government scheme that provides subsidized LPG connections to economically disadvantaged households. Over 10 crore beneficiary households, primarily women from low-income families, receive support to access clean cooking fuel, reducing reliance on traditional polluting fuels.
The subsidy will strengthen the financial stability of the oil marketing companies by relieving balance sheet stress, improving liquidity, supporting ongoing operations, and potentially enhancing their credit ratings and investor confidence. This ensures they can maintain uninterrupted LPG supply despite previous losses from regulated pricing.