Our Bureau
New Delhi
The Indian government is considering a major revision to its LPG subsidy calculation formula following state-run oil firms’ landmark one-year contracts for US imports, representing nearly 10% of the nation’s annual needs.
Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL), and Hindustan Petroleum Corp Ltd (HPCL) signed deals last month to import 2.2 million metric tonnes per annum (MMTPA) of LPG from the US for the 2026 contract year. This marks the first term contract for US supplies, shifting from prior spot market purchases. The move diversifies India’s import basket amid volatile global energy markets.
Currently, subsidies rely solely on the Saudi Contract Price (CP), the benchmark for West Asian supplies. Oil executives argue this ignores US benchmark prices and freight costs nearly four times higher for transatlantic shipments. US LPG only proves economical when discounts to Saudi CP sufficiently offset these expenses, sources noted.
Government-regulated household LPG prices leave state firms selling below market rates, with losses reimbursed via subsidies. The proposed tweak aims to align compensation with diverse sourcing, ensuring fiscal sustainability as imports evolve.
Industry officials emphasized the need for a blended formula incorporating multiple benchmarks to reflect real costs accurately. This comes as India, a top LPG consumer, balances affordable cooking fuel for millions with oil marketing companies’ viability.
