Oil marketing companies are continuing to face heavy financial strain from LPG under-recoveries at a time when the government is preparing to release subsidies over the coming months, ANI reported citing a report from Nuvama Research.
The report said LPG-related losses for the companies currently stand at ₹53,700 crore. It added that the companies are likely to receive LPG subsidy of ₹30,000 crore, in 12 tranches from the government, while cumulative under-recoveries were around ₹53,700 crore, at the end of September 2025.
The report stated “OMCs are likely to get LPG subsidy of ₹30,000 crore in 12 tranches from the government versus cumulative under-recoveries of ~₹53,700 crore at end-Sep’25”. The equal monthly instalments are planned to begin in November 2025 and will be recorded directly as revenue once released.
However, the report said that under-recoveries are expected to rise further. Regional LPG prices usually increase during the winter months, and the declared subsidy covers only about 56 per cent of the existing cumulative losses. This indicates that the financial gap for the companies is likely to widen even with the subsidy support.
LPG under-recovery is the loss that occurs when the cost of importing or sourcing LPG is higher than the retail price made available to consumers. The government partly covers this gap through subsidy payments, but the current amount does not fully address the load on the oil companies.
Nuvama Research also said that capital expenditure for these companies is expected to stay high because of long-gestation infrastructure projects. This is expected to put pressure on return ratios in the near term.
The report added that valuations of city gas distribution companies may face de-rating, with the sector continuing to deal with uncertainty linked to ad-hoc government policies. On the upstream side, the report said ONGC’s production guidance looks optimistic even though the company has not met its targets for the past seven years. It also maintained caution on GAIL due to weak demand conditions and continuing volatility in its marketing earnings.
Overall, the report pointed to rising challenges for the oil and gas sector, with subsidy support providing only partial relief while under-recoveries and sector-wide pressures continue to grow.
