LPG under-recovery hits ₹690; PNG push in 2026

Why the petroleum ministry is pushing PNG now

India’s petroleum ministry has asked states to speed up household migration to piped natural gas (PNG) in locations where the distribution network already exists, as losses on domestic LPG sales widen. The request comes as oil marketing companies (OMCs) report an under-recovery of about ₹690 per domestic LPG cylinder, according to petroleum secretary Neeraj Mittal. Under-recovery is the notional loss that OMCs incur when regulated domestic prices remain below international benchmarks.

The ministry has urged states to direct district collectors and urban local bodies to nudge households to opt for PNG connections where available. The stated logic is that every shift from a subsidised or regulated cylinder to a pipeline connection can reduce pressure on the cooking fuel subsidy and under-recovery burden borne by state-run retailers.

West Asia disruption and the return of price hikes

The push follows sustained stress in global energy flows linked to the West Asia conflict, which began on 28 February and has disrupted supplies, including through the Strait of Hormuz. Against this backdrop, OMCs raised domestic LPG prices by ₹29 per cylinder on June 7, marking the second hike since the conflict began. This followed a ₹60 per cylinder hike in March, taking the cumulative increase over three months to ₹89 per cylinder.

Even after these revisions, government briefings and industry estimates indicate that OMCs continue to incur losses of roughly ₹600 to ₹700 per 14.2 kg domestic cylinder. Officials have also said there is no shortage of petroleum products, adding that refineries are operating at optimum levels and distributors have not reported stockouts.

What the numbers say on LPG economics

Officials said the actual cost of an LPG cylinder to OMCs has risen to about ₹1,600 per 14.2 kg cylinder. In Delhi, a domestic cylinder is priced at ₹942 after the latest hike, up from ₹913. For Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries, the effective price is ₹642 per cylinder after a ₹300 subsidy per refill.

The government has also clarified that the Ujjwala subsidy will continue, but PMUY beneficiaries will now receive the subsidy for four refills a year, down from nine refills announced last year. Separate from the subsidy, the under-recovery is described as the gap between international costs and the regulated retail price.

The ministry’s loss estimates and subsidy outgo

In communications to states, petroleum secretary Neeraj Mittal pointed to the scale of losses from selling domestic LPG below cost. He stated that a loss of ₹690 per cylinder translates into an annual loss of around ₹138,000 crore for OMCs. He also highlighted the fiscal impact of the PMUY support, stating that the ₹300 per cylinder subsidy implies an additional outgo of about ₹19,000 crore per year.

Mint earlier reported that the government provided financial support of around ₹123,000 crore to state-run OMCs for losses during the first 78 days of the West Asia conflict, including excise duty cuts on petrol and diesel aimed at shielding consumers from higher crude prices.

Auto fuels: under-recoveries have narrowed, but remain present

A senior government official said under-recoveries have reduced to about ₹30 per litre on diesel and ₹6 per litre on petrol, following cumulative fuel price increases of around ₹7.5 per litre over the last month. This compares with under-recoveries reported as high as ₹105 per litre on diesel and ₹24 per litre on petrol as of April 1.

Separate industry-source estimates cited losses of around ₹11 per litre on petrol and ₹33.6 per litre on diesel despite recent increases. The divergence reflects different snapshots and assumptions, but both sets of figures point to continued stress on retail margins when global prices rise sharply.

Saudi CP benchmark: why cylinder costs rose

The government linked the higher LPG supply cost to the Saudi Contract Price (CP) benchmark. It said the Saudi CP rose nearly 46% from $143 a tonne before disruption to $175 a tonne in May, and increased further to $190 a tonne in June. Another government-linked update placed LPG prices based on the Saudi CP benchmark at around $180 per tonne.

With domestic retail prices still administered, the rise in international benchmarks has been a key driver of the widening gap between OMCs’ cost and the consumer price for domestic cylinders.

What ICRA and other estimates indicate about daily losses

The government has said daily under-recovery on petroleum products, including domestic LPG, is around ₹600 to ₹700 crore. In another assessment, ICRA estimated that at crude prices of $120 to $125 a barrel, under-recoveries on petrol, diesel and domestic LPG are around ₹700 to ₹800 crore per day even after recent hikes.

PTI, citing sources, also reported a period where OMCs were incurring under-recoveries of about ₹1,600 to ₹1,700 crore a day, with losses crossing ₹1 lakh crore in 10 weeks. Separately, Systematix estimated total industry-wide losses at ₹1.7 to ₹1.8 lakh crore, and said the latest increase offsets only about 7% to 8% of cumulative under-recoveries over nearly three months of unchanged retail prices.

Key facts at a glance

Why PNG migration is being emphasised

The ministry’s letter to states effectively frames PNG migration as a demand-side tool to limit exposure to volatile international LPG prices. Where city gas distribution networks are already present, moving households to PNG can lower dependence on cylinders that are priced below cost. The instruction to involve district collectors and urban local bodies signals the government wants local administration to play a direct role in accelerating adoption.

At the same time, the ministry and officials have stressed that supplies remain adequate. The policy emphasis, therefore, is not framed as a shortage response, but as a financial and pricing response to a period of elevated global energy benchmarks.

Conclusion

The petroleum ministry’s push to migrate households to PNG where infrastructure exists comes as domestic LPG under-recoveries remain near ₹690 per cylinder despite a ₹29 price hike from June 7. With officials putting the cylinder supply cost near ₹1,600 and daily under-recoveries in the ₹600 to ₹800 crore range in various estimates, the pressure on OMC finances remains central to the policy narrative. The next signals for consumers and markets are likely to come from further pricing actions, subsidy design updates for PMUY refills, and any additional steps states take to speed up PNG connections in covered urban areas.