IOCL Expects LPG Under-Recoveries to Reach ₹370 Per Cylinder in December

State-run oil marketing companies are facing mounting pressure on domestic cooking gas margins as international benchmark prices climb. According to Indian Oil Corporation (IOCL), the under-recovery on liquefied petroleum gas is projected to rise to ₹370 per 14.2 kg domestic cylinder in December.

Anuj Jain, Director (Finance) at IOCL, shared the projections during a post-results analyst call. He noted that the under-recovery stood at ₹184 per cylinder in September, increased to ₹229 in October, and is estimated at ₹309 per cylinder in November before reaching the ₹370 mark in December. The anticipated increase is primarily linked to the rise in the Saudi Contract Price (CP), which has advanced to $756 per tonne.

Public sector oil marketing companies continue to record significant financial deficits from selling cooking fuel below prevailing market rates to over 33 crore households. Financial disclosures indicate that as of September 30, IOCL's cumulative under-recovery on LPG stood at ₹32,505.69 crore. Meanwhile, Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) reported cumulative under-recoveries of ₹17,334.40 crore and ₹18,048.82 crore, respectively.

Despite the widening margins on retail cooking fuel sales, IOCL posted strong financial results for the September quarter of fiscal year 2027. The company's net profit more than doubled to approximately ₹22,503 crore. Management attributed the quarterly performance to lower crude oil prices between mid-June and mid-August, alongside robust margins from refining, petrochemicals, and gas operations, which helped offset losses from retail fuel sales.

However, the state-run fuel retailer has cautioned that future profitability could face headwinds. The company warned that upcoming quarters might see adverse impacts from inventory losses if crude oil prices decline further alongside normalization of geopolitical situations in the Middle East.

"The rising under-recoveries in the oil and marketing sector highlight the structural margin pressures faced by state-run fuel retailers when global benchmark prices climb. While downstream companies like IOCL have cushioned recent losses through strong refining margins and temporary dips in crude prices, widening deficits on regulated cooking gas pose a persistent fiscal challenge. Businesses operating in energy-dependent sectors must closely monitor these commodity price shifts, as inventory fluctuations and international supply costs can rapidly alter quarterly profitability." — Dr. Shishir Gupta, Founder & CEO, StartupLanes