Relief in sight for IOC, BPCL, HPCL? LPG losses for oil firms may drop 45% in FY26 if crude stays at $65/barrel, says report

India’s oil marketing companies (OMCs) may finally be heading for some relief after years of absorbing losses on domestic LPG sales. 

According to a CareEdge Ratings report, LPG-related losses for Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) could fall by nearly 45 per cent in FY26, if crude oil prices average around $65 per barrel. The report suggests a positive shift in outlook for the three public sector companies, which bore the brunt of high under-recoveries in the past two years.

Steep losses in FY25 weigh down profits

During FY25, IOC, BPCL and HPCL together faced LPG under-recoveries of around Rs 41,270 crore. According to CareEdge, oil marketing companies lost an average of Rs 220 on each 14.2 kg LPG cylinder during the year. This had a major impact on their profitability. The combined profit after tax (PAT) of the three companies fell sharply to Rs 35,000 crore in FY25, compared to Rs 85,000 crore in the previous year.

The scale of the losses reflects how global energy prices and controlled domestic rates have been difficult to balance for these firms, especially without a regular compensation framework.

Price hike in April brings temporary relief

In a move expected to provide some cushion, the government raised domestic LPG prices by Rs 50 on April 8, 2025. This took the cost of a 14.2 kg cylinder in Delhi to Rs 853. CareEdge observed,  that the Rs 50 price hike is expected to reduce the under-recovery burden on OMCs by 25 per cent to Rs 165 per cylinder.

This revision, although modest, is seen as a step toward narrowing the gap between international and domestic prices. It could help bring partial financial stability to the firms in FY26, provided there are no major global price shocks.

FY26 outlook hinges on stable crude prices

The report assumes that crude oil will remain at around $65 per barrel through FY26. If this holds, LPG under-recoveries are projected to come down significantly. However, CareEdge cautioned, “Any adverse movement in international prices or currency may impact the financial performance of the OMCs going forward.”

Meanwhile, other revenue drivers have been mixed. The average gross marketing margin on petrol and diesel fell to Rs 3.5 per litre in FY25 from Rs 7 per litre in FY24. Refining margins have helped support earnings, but analysts say a more predictable subsidy framework is needed to shield the companies from sharp volatility.

The Centre had earlier provided Rs 30,000 crore in FY23 to partially offset LPG losses, but the total shortfall was nearly Rs 39,000 crore. With fiscal space tightening, the focus is now on self-correction through price adjustments and favourable global trends.