New Delhi, August 17: A recent report indicates that after recording strong profitability in the fiscal year 2026, government oil marketing companies (OMCs) are facing pressure on their income and profitability in the first quarter of fiscal year 2026-27. Despite improvements in refining margins, significant under-recovery on LPG and marketing losses have adversely affected the companies’ earnings.
According to the Care Ratings report, the three major oil marketing companies in the country encountered a combined under-recovery of approximately ₹13,700 crores on LPG sales in the first quarter of fiscal year 2027, after accounting for the ₹7,500 crores compensation received from the government. The companies provided cooking gas cylinders to domestic consumers at prices lower than the market rate, resulting in these losses.
Care Ratings noted that total LPG under-recovery surged from ₹48,200 crores as of March 31, 2026, to ₹61,900 crores by June 30, 2026. This sharp increase was primarily due to unprecedented disruptions in the global LPG supply chain caused by conflicts in West Asia and the closure of the Hormuz Strait. This situation significantly widened the gap between import costs and retail prices.
The report highlighted a substantial spike in the international LPG benchmark, the Saudi Contract Price (Saudi CP). The average price for fiscal year 2025-26 was $530 per metric ton, which soared to $785 per metric ton in the first quarter of fiscal year 2027, marking an increase of nearly 50%.
However, as supply conditions improved in the following months, prices softened somewhat. The Saudi CP fell to $592 per metric ton in July 2026 and further to $632 per metric ton in August 2026.
India imports about 60% of its LPG needs. Following disruptions in supply from West Asia, the country increased its LPG purchases from the U.S. and other markets. However, this shift to alternative sources led to a significant rise in the landed cost (import cost) for companies.
To mitigate the impact of rising purchase costs, the government and oil companies adjusted domestic LPG prices. During the first quarter of fiscal year 2027, the price of a 14.2 kg domestic gas cylinder was increased by ₹89 to alleviate some of the under-recovery burden.
The report also noted that due to the decline in international LPG prices since July 2026, companies have seen a reduction in their purchase costs. Consequently, a sequential decrease of about 40% in LPG under-recovery is anticipated in the second quarter of fiscal year 2027.
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