OMCs’ LPG under-recoveries may fall 40% in Q2 as global costs ease
State-run fuel retailers’ LPG under-recoveries are projected to decline sequentially to about ₹8,200 crore in Q2FY27 from ₹13,700 crore, helped by softer global prices and US sourcing. Cumulative losses remain substantial, while Delhi’s 14.2-kg cylinder price stands at ₹942.
What happened
State-run oil marketing companies (OMCs) · India’s state-run fuel retailers are expected to cut LPG under-recoveries by about 40% in Q2FY27 as global sourcing
Key facts
- LPG under-recoveries may fall 40% sequentially to about Rs 8,200 crore in Q2FY27 from Rs 13,700 crore in Q1FY27
- Cumulative under-recoveries reached about Rs 61,900 crore as of June 30, versus Rs 48,200 crore at March-end
- Saudi Contract Price rose nearly 50% to $785 per tonne in Q1FY27 from $530 per tonne in FY26, then eased to $592 in July and rose to $632 in August
- Under-recovery is projected at about Rs 300 per cylinder in Q2FY27, versus Rs 500 in Q1FY27
- Domestic LPG prices rose Rs 89 per 14.2-kg cylinder during March-June; Delhi price is Rs 942
- India imports around 60% of LPG requirements; import dependence fell to around 35% during March-June
- OMCs contracted 2.2 million tonnes from the US Gulf Coast for 2026, around 10% of annual imports
- LPG demand fell 21% to 2.2 million tonnes monthly during March-June; FY27 demand may decline 6% year-on-year
Why this matters
Softer global LPG costs and increased US sourcing strengthen the case for diversified import partnerships and flexible procurement contracts to reduce exposure to future under-recoveries.
What to watch
- Monthly Saudi Contract Price and US Mont Belvieu propane/butane benchmarks.
- Crude oil movements, INR/USD changes, and LPG freight rates.
- OMC monthly LPG under-recovery disclosures and any government compensation announcement.
- Delhi domestic LPG cylinder price revisions and changes to PMUY or targeted subsidy support.
- US LPG export availability, shipping disruptions, and Middle East supply-risk developments.
- Maintain OMC pricing discipline and prioritize recovery of accumulated LPG losses before broad consumer-price reductions.
- Increase procurement flexibility toward US-linked cargoes where delivered economics remain favorable versus traditional supply routes.
- Use any fiscal or pricing headroom for targeted LPG affordability measures rather than a broad-based subsidy expansion.
- For consumer-facing retailers, treat potential LPG savings as a modest tailwind for value retail, staples, and rural-discretionary demand rather than a base-case demand catalyst.