LPG Under-Recovery May Rise to ₹370 Per Cylinder in December 2026 as Oil Companies Face Mounting Losses

Key Takeaways

• Indian Oil Corporation expects domestic LPG under-recovery to increase to ₹370 per 14.2 kg cylinder in December 2026.
• The estimated under-recovery has risen from ₹184 in September to ₹229 in October and ₹309 in November.
• IOC, BPCL and HPCL had accumulated combined fuel under-recoveries of approximately ₹67,900 crore by September 30, 2026.
• Domestic LPG prices have remained unchanged since March despite higher international benchmark prices.
• The government has allocated ₹30,000 crore in compensation for oil marketing companies across FY26 and FY27.
• The projected ₹370 is an estimated loss for oil companies, not a proposed increase in the retail price of an LPG cylinder.

LPG Under-Recovery Expected to Reach ₹370 in December

India’s public-sector oil marketing companies are facing increasing financial pressure from domestic cooking gas sales as international LPG prices rise while household cylinder prices remain unchanged.

Indian Oil Corporation (IOC) Director of Finance Anuj Jain said during an investor conference call that the company’s under-recovery on domestic LPG had increased to ₹229 per 14.2 kg cylinder in October 2026.

The figure is expected to rise further to approximately ₹309 in November and ₹370 in December.

The progression indicates that the gap between the cost of supplying domestic LPG and the amount recovered through retail sales is widening.

Month	Estimated LPG under-recovery per cylinder
September 2026	₹184
October 2026	₹229
November 2026	₹309
December 2026	₹370

The December estimate represents an increase of approximately 101% compared with September.

Jain attributed the rising under-recovery partly to higher international LPG benchmark prices. He specifically pointed to the Saudi Contract Price (Saudi CP), which had increased to $756 per tonne.

These figures are management estimates and may change depending on international prices, exchange rates, freight costs, government compensation and domestic pricing decisions.

What Is LPG Under-Recovery?

Under-recovery refers to the difference between the actual cost incurred by an oil marketing company in supplying a product and the amount it receives from selling that product.

In India’s domestic LPG market, public-sector oil companies sell cooking gas at prices influenced by government policy.

When the international cost of LPG rises but the domestic retail price does not increase accordingly, oil companies cannot fully recover their costs from customers.

The resulting difference is recorded as an under-recovery.

For example, if the effective cost of supplying a domestic LPG cylinder is ₹1,000 but the company receives ₹630 through the sale, the difference of ₹370 represents an under-recovery before applicable compensation.

This does not necessarily mean that the entire amount becomes a permanent loss for the company. The government may provide compensation to offset part of the financial burden.

However, delays in receiving compensation can increase the working-capital requirements of oil marketing companies and put pressure on their balance sheets.

Why Are LPG Under-Recoveries Increasing?

The main reason is the difference between international LPG prices and domestic retail prices.

India imports a substantial portion of the LPG it consumes. Consequently, domestic supply costs are influenced by international benchmark prices, transportation expenses, currency movements and other supply-chain costs.

When international prices increase, the cost of importing LPG also rises.

However, domestic household cylinder prices do not necessarily move at the same pace because the government seeks to keep cooking gas affordable for consumers.

The current situation reflects three major pressures:

1. Higher international LPG benchmark prices

The Saudi Contract Price is an important benchmark for LPG imports into India.

IOC’s management highlighted an increase in this benchmark to $756 per tonne. Higher benchmark prices increase the cost of procuring imported LPG and contribute to the growing gap between supply costs and domestic selling prices.

2. Domestic prices remain unchanged

Domestic LPG prices have remained unchanged since March 2026, according to the reported industry figures.

When international procurement costs increase without corresponding changes in retail prices, oil marketing companies absorb the difference until compensation or other adjustments are made.

3. Government compensation does not immediately eliminate the burden

The government provides financial support to public-sector oil marketing companies to help cover losses associated with selling domestic LPG below cost.

However, compensation may not arrive at the same time as the expenses are incurred.

This creates a financial gap for companies that continue purchasing, distributing and selling cooking gas.

IOC, BPCL and HPCL Carry ₹67,900 Crore in Under-Recoveries

The growing LPG burden is affecting all three major public-sector oil marketing companies.

According to company filings, Indian Oil, Bharat Petroleum and Hindustan Petroleum had accumulated combined fuel under-recoveries of approximately ₹67,900 crore as of September 30, 2026.

The company-wise figures were:

Oil marketing company	Accumulated under-recovery
Indian Oil Corporation	₹32,505.69 crore
Bharat Petroleum Corporation	₹17,334.40 crore
Hindustan Petroleum Corporation	₹18,048.82 crore
Combined total	₹67,888.91 crore

IOC accounted for the largest portion of the accumulated amount, followed by HPCL and BPCL.

These figures cover accumulated fuel under-recoveries reported by the companies and should not be interpreted as LPG-only losses. They reflect the wider financial exposure associated with fuel sales, including the domestic LPG burden.

The figures demonstrate why the timing and scale of government compensation matter for the financial health of public-sector fuel retailers.

Oil Companies Report Strong Profits Despite Fuel Losses

Interestingly, the rising under-recovery burden has not prevented the three oil marketing companies from reporting strong quarterly profits.

IOC, BPCL and HPCL together reported standalone net profits of ₹30,106 crore in the July-September quarter of FY27.

Their combined earnings increased 68.3% compared with the corresponding period a year earlier.

The companies also moved from a combined loss of approximately ₹18,150 crore in the April-June quarter to a substantial profit in the following quarter.

However, the improvement was largely supported by higher refining margins and inventory gains.

Company	Q2 FY27 standalone net profit
Indian Oil Corporation	₹21,630 crore
Bharat Petroleum	₹4,993 crore
Hindustan Petroleum	₹3,483 crore
Combined profit	₹30,106 crore

IOC recorded its highest-ever standalone quarterly net profit, while BPCL and HPCL reported year-on-year declines.

The results show that refining operations can generate substantial earnings even when the companies face losses on certain retail fuel products.

However, strong refining profits do not automatically eliminate the financial burden created by domestic LPG under-recoveries.

Government Allocates ₹30,000 Crore for LPG Compensation

The government has committed financial support to help public-sector oil marketing companies manage the cost of selling domestic LPG below market-linked prices.

According to a government statement, compensation of ₹30,000 crore is being provided across FY26 and FY27.

The government has also highlighted the accumulated under-recoveries of oil marketing companies, which exceeded ₹62,000 crore as of August 31, 2026.

The subsidy system is intended to protect household consumers from the full impact of international LPG price movements.

However, the difference between the actual cost of supplying cooking gas and the amount collected from customers can remain significant even after government support.

It is important to distinguish between the government’s implicit subsidy estimate for a particular month and the under-recovery calculated by an individual oil company. These figures may use different cost and compensation assumptions and should not be treated as directly interchangeable.

The longer the gap persists, the greater the financial pressure on companies responsible for importing and distributing cooking gas.

Will LPG Cylinder Prices Increase in December?

The projected rise in under-recovery has raised questions about whether domestic LPG prices could increase in the coming months.

However, the ₹370 estimate does not mean that consumers will automatically pay ₹370 more for a cylinder in December.

It represents the estimated difference between the cost of supplying domestic LPG and the amount recovered by the oil marketing company under prevailing pricing arrangements.

Any change in the retail price would depend on government policy, international LPG prices, the subsidy framework and decisions by the oil marketing companies.

The government may choose to maintain existing prices and provide additional compensation, or it could consider other adjustments depending on the economic situation.

As of November 2, 2026, no retail LPG price increase corresponding to the projected ₹370 under-recovery has been announced.

The Bigger Picture

The rising LPG under-recovery highlights the financial challenges involved in maintaining affordable cooking fuel in a country that depends significantly on imported energy. International price movements can quickly increase the cost of domestic supply, while government efforts to protect households from sudden price increases transfer part of the burden to public-sector oil companies and the government budget.

The situation also demonstrates why quarterly profits need to be examined alongside accumulated under-recoveries and cash flows. Refining margins and inventory gains can improve reported earnings, but they do not necessarily resolve the financial exposure created by regulated or government-influenced retail prices. The sustainability of the LPG subsidy framework will therefore remain important for both consumers and oil companies.

Looking Ahead

The next few months will be important for India’s oil marketing companies as they monitor international LPG benchmarks and the government’s compensation arrangements. IOC’s estimate of ₹370 per cylinder in December could change if global prices, exchange rates or domestic pricing policies move differently from current expectations.

For consumers, the key issue is whether the government can maintain affordable cooking gas without allowing the financial burden on oil companies to grow indefinitely. Any decision on retail prices or additional compensation will influence the sector’s financial position and the cost of household energy.