Shares of major Indian Oil Marketing Companies (OMCs) — Indian Oil Corporation Ltd (IOC), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum Corporation Ltd (BPCL) — are expected to see significant market reaction following a recent hike in commercial LPG cylinder prices.
Effective June 1, the price of a 19kg commercial LPG cylinder in Delhi increased by ₹42, bringing its retail cost to ₹3,113.50. This marks the second price adjustment since May. In Kolkata, the price for the same cylinder rose by ₹53.50, now retailing at ₹3,255.50. Additionally, the cost of 5kg Free Trade LPG (FTL) cylinders in Delhi saw an ₹11 increase, reaching ₹821.5.
OMCs Grapple with Significant LPG Losses
Stock analysts have highlighted the persistent and substantial losses faced by OMCs in the LPG sector. A note from ICICI Securities dated May 25 warned that cumulative LPG losses for India’s three OMCs for FY26 were projected to be around ₹19,400 crore. Furthermore, given a sharp spike in Asia spot prices – with Japan propane and butane prices rising by $200 per tonne in the last three months – quarterly losses could aggregate ₹30,000 crore if price increases were not implemented.
The brokerage detailed that the loss per cylinder escalated to ₹650 in May, a significant jump from ₹170 per cylinder in April and ₹100-120 per cylinder in Q4. This implies average losses surged to ₹5,040 crore in Q4 and are estimated to climb to ₹22,000 crore in Q1FY27.
Protecting Net Worth Amid Market Volatility
Industry experts noted that these price adjustments, while impactful for consumers, are crucial for safeguarding the net worth of the OMCs. This necessity is further underscored by the ongoing uncertainty surrounding geopolitical events, such as the US-Iran conflict, which influences global energy prices.
The government has also taken steps to manage LPG distribution, invoking the Essential Commodities Act (ECA). This act prioritizes LPG supply for critical sectors including households, hospitals, and educational institutions, while imposing restrictions on commercial distribution.
Meanwhile, HDFC Institutional Equities pointed out that OMCs continue to incur losses on the sale of auto fuels, despite government reductions in Special Additional Excise Duty (SAED) and an increase in retail selling prices. The brokerage suggested potential government compensation mechanisms, such as selling domestically produced crude oil at a discount or imposing special duties on upstream companies, to alleviate these financial pressures on OMCs.