In a significant move to ensure energy security and protect consumers from volatile global energy prices, the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a substantial compensation package of ₹30,000 crore for the three public sector Oil Marketing Companies (OMCs). This financial support is intended to cover the under-recoveries incurred by these companies on the sale of domestic LPG cylinders.
The decision comes as international LPG prices have remained at high levels, particularly throughout the last fiscal year. Despite this, the government has refrained from passing on the full cost increase to consumers, leading to significant financial losses for the OMCs.
Key Details of the Cabinet Decision
- Amount and Beneficiaries: A total of ₹30,000 crore has been approved as compensation to the three primary public sector OMCs:
- Indian Oil Corporation (IOCL)
- Bharat Petroleum Corporation (BPCL)
- Hindustan Petroleum Corporation (HPCL)
- Purpose: The subsidy is designed to offset the losses (under-recoveries) faced by these companies from selling domestic LPG cylinders at regulated prices that are below the market cost.
- Payment Structure: The compensation will be disbursed by the Ministry of Petroleum and Natural Gas in twelve tranches, providing a steady flow of funds to the OMCs.
- Rationale: According to a statement from the Press Information Bureau (PIB), the move aims to shield consumers from fluctuations in global energy markets. It also reinforces the government’s commitment to the financial health of the PSU OMCs, allowing them to continue crucial operations like crude and LPG procurement, debt servicing, and capital expenditure.
Impact on Consumers and the Economy
This decision is a direct continuation of the government’s policy to maintain a stable price for household cooking gas. By compensating the OMCs directly, the government ensures that the burden of high international prices does not fall on the shoulders of the common consumer. This is especially vital for beneficiaries of schemes like the Pradhan Mantri Ujjwala Yojana (PMUY), which aims to provide clean cooking fuel to economically disadvantaged households.
The financial injection will help the OMCs maintain their supply chains and ensure the uninterrupted availability of LPG cylinders across the country. It also brings clarity to the financial outlook of these companies, which is expected to be viewed positively by investors and the market.
