India Absorbs Rs 700 Loss on Every LPG Cylinder as Supply Cost Crosses Rs 1,600 Amid Strait of Hormuz Crisis

The cost of supplying a standard 14.2-kg domestic LPG cylinder has risen past Rs 1,600, driven by a sharp spike in international benchmark prices following disruptions in the Strait of Hormuz. Despite a modest price increase of Rs 29 per cylinder effective June 6, 2026, Indian consumers continue to pay among the lowest cooking gas prices in the world, with the government and public sector oil marketing companies absorbing an under-recovery of approximately Rs 700 on every domestic refill. The Ministry of Petroleum and Natural Gas disclosed cumulative under-recoveries of Rs 60,000 crore for FY 2025-26, with the Union Cabinet approving Rs 30,000 crore in compensation to oil marketing companies.

Quick Facts

  • Import-linked supply cost of 14.2-kg domestic LPG cylinder: Above Rs 1,600
  • Retail price in Delhi (non-PMUY consumer): Rs 942 per cylinder (after Rs 29 hike effective June 6, 2026)
  • Effective price for PMUY Ujjwala beneficiaries: Rs 642 per cylinder on first four refills annually (after Rs 300 direct benefit transfer)
  • Under-recovery absorbed per cylinder: Approximately Rs 700
  • Cumulative under-recovery FY 2025-26: Rs 60,000 crore (up from Rs 41,338 crore in FY 2024-25)
  • Union Cabinet compensation approved for oil marketing companies: Rs 30,000 crore
  • PMUY connections covered by Rs 300 subsidy: More than 10.58 crore
  • Saudi Aramco Contract Price increase since February 2026: Approximately 46%
  • Blended Saudi CP (50:50 propane-butane) in February 2026: USD 542.50 per tonne
  • Blended Saudi CP in June 2026: USD 790 per tonne
  • Source: Ministry of Petroleum and Natural Gas, ANI (June 7, 2026)

What Happened?

The Ministry of Petroleum and Natural Gas on June 7, 2026 disclosed that the import-linked cost of supplying a 14.2-kg domestic LPG cylinder has risen above Rs 1,600, reflecting a sharp increase in international benchmark prices since the onset of disruptions in the Strait of Hormuz. Saudi Aramco's Contract Price for the standard 50:50 propane-butane blend stood at USD 542.50 per tonne in February 2026, before tightening Mideast Gulf exports pushed the April contract to USD 775 per tonne. By June, the price had edged further to USD 790 per tonne. Propane prices climbed 39 per cent and butane 52 per cent over the same period, according to the Ministry.

To partially offset this cost increase, domestic LPG prices were raised by Rs 29 per cylinder with effect from June 6, 2026. Following the hike, the retail price for a general consumer in Delhi stands at Rs 942 per cylinder. PMUY Ujjwala beneficiaries continue to receive Rs 300 per cylinder in direct benefit transfers for the first four refills each year, bringing their effective price to Rs 642. Despite the revision, a gap of approximately Rs 700 per cylinder remains between the market-linked supply cost and the consumer price, which is being absorbed by the government and public sector oil marketing companies.

Key Facts

  • The import-linked supply cost of a 14.2-kg domestic LPG cylinder has crossed Rs 1,600, driven by the West Asia crisis and Strait of Hormuz disruptions.
  • Saudi Aramco's Contract Price for LPG rose approximately 46% between February and June 2026, with propane up 39% and butane up 52%.
  • A retail price increase of Rs 29 per cylinder was implemented with effect from June 6, 2026.
  • Delhi general consumers now pay Rs 942 per cylinder, approximately 45% below the international price, according to the Ministry.
  • Ujjwala beneficiaries pay an effective Rs 642 per cylinder on their first four annual refills after the Rs 300 direct benefit transfer, roughly 60% below international prices.
  • Oil marketing companies are absorbing an under-recovery of approximately Rs 700 on every domestic cylinder sold.
  • Cumulative under-recovery on domestic LPG reached Rs 60,000 crore in FY 2025-26, compared to Rs 41,338 crore in FY 2024-25.
  • The Union Cabinet has approved Rs 30,000 crore in compensation for oil marketing companies, separate from the Ujjwala subsidy mechanism.
  • India maintained supply security during the Hormuz disruption, raising domestic LPG production by over 60% to 52 thousand metric tonnes and diversifying imports to include the US, Canada, and Algeria.
  • OTP-based delivery verification to prevent diversion of subsidised domestic LPG into the commercial market was raised to approximately 90%.
  • A 19-kg commercial cylinder used by hotels and restaurants sells at Rs 3,113.50 in Delhi, reflecting a fully market-priced rate of approximately Rs 164 per kg. Domestic consumers pay approximately Rs 66 per kg after the revision.
  • India's retail LPG prices remain lower than those in Pakistan (Rs 1,046), Nepal (Rs 1,207), Bangladesh (Rs 1,225), Sri Lanka (Rs 1,241), the US (Rs 1,755), Australia (Rs 1,765), and Canada (Rs 2,411), according to the Ministry.

Why It Matters

Domestic LPG pricing in India affects hundreds of millions of households that rely on cooking gas as their primary fuel source. The Pradhan Mantri Ujjwala Yojana alone covers more than 10.58 crore connections, primarily in lower-income households. The widening gap between market-linked supply costs and the consumer price - now approximately Rs 700 per cylinder - reflects the sustained fiscal burden the government has chosen to absorb in order to insulate households from the full impact of an international energy price shock. The jump in cumulative under-recovery from Rs 41,338 crore in FY 2024-25 to Rs 60,000 crore in FY 2025-26 underlines the scale of that commitment.

What It Means for India

The Petroleum Ministry's disclosure comes as India navigates a period of elevated global energy costs driven by the West Asia crisis and constraints on the Strait of Hormuz, a critical shipping corridor for energy exports from the Middle East. India's decision to raise domestic LPG production by over 60% and diversify import sourcing to the US, Canada, and Algeria during the disruption reflects an active strategy to maintain supply continuity. The gap between domestic consumer prices and prevailing international rates - approximately 45% for general consumers and 60% for Ujjwala beneficiaries - positions India's cooking gas pricing among the most subsidised globally. The Ministry cited this in the context of ongoing volatility to justify the pricing structure while urging households to adopt energy-efficient cooking practices to conserve the subsidised resource.

Industry Impact

Public sector oil marketing companies (OMCs) are bearing significant financial strain from the domestic LPG pricing policy. The cumulative under-recovery of Rs 60,000 crore for FY 2025-26 and the Cabinet-approved compensation of Rs 30,000 crore leave a substantial uncovered gap on the books of these companies. The price hike of Rs 29 per cylinder effective June 6, 2026, while a partial adjustment, does not close the approximately Rs 700 per cylinder shortfall. The 19-kg commercial cylinder - sold at full market rates - provides a visible benchmark for the scale of the subsidy on the domestic side, with the two categories now priced at roughly Rs 66 per kg versus Rs 164 per kg respectively, according to Ministry data reported by Telangana Today.

Latest Developments

The Ministry of Petroleum and Natural Gas made its disclosures on June 7, 2026, coinciding with the implementation of the Rs 29 per cylinder domestic LPG price hike that took effect on June 6, 2026. Joint Secretary Sujata Sharma of the Ministry of Petroleum and Natural Gas confirmed the under-recovery figure of approximately Rs 700 per cylinder at a media briefing, as reported by India.com. The Cabinet has approved Rs 30,000 crore in compensation to oil marketing companies separately from the Ujjwala subsidy, which continues to reach more than 10.58 crore connections.

Top India News Analysis

The government's decision to absorb a Rs 700 per cylinder under-recovery rather than pass the full cost of international price increases on to consumers reflects a policy choice to prioritise household affordability over fiscal neutrality in the energy sector. The disclosure of the Rs 60,000 crore cumulative under-recovery for FY 2025-26 - a 45% increase over the previous year's figure - makes visible the cost of that choice. The simultaneous actions of diversifying import sourcing, raising domestic production, and tightening anti-diversion enforcement indicate that supply security and subsidy integrity were treated as concurrent priorities during the Hormuz disruption period. The Ministry's comparison of Indian consumer prices against neighbouring countries and advanced economies frames the pricing policy as a deliberate competitive and social measure, though the scale of under-recovery raises questions about the long-term fiscal sustainability of the current structure if international prices remain elevated.

Key Takeaways

  • The import-linked cost of supplying a 14.2-kg domestic LPG cylinder has crossed Rs 1,600, driven by a 46% rise in Saudi Aramco's Contract Price since February 2026 due to Strait of Hormuz disruptions.
  • An under-recovery of approximately Rs 700 per cylinder is being absorbed by the government and public sector oil marketing companies.
  • Domestic LPG prices were raised by Rs 29 per cylinder effective June 6, 2026, bringing the Delhi retail price for general consumers to Rs 942.
  • PMUY Ujjwala beneficiaries pay an effective Rs 642 per cylinder on their first four annual refills after the Rs 300 direct benefit transfer.
  • Cumulative under-recovery on domestic LPG reached Rs 60,000 crore in FY 2025-26, up from Rs 41,338 crore the previous year.
  • The Union Cabinet approved Rs 30,000 crore in compensation for oil marketing companies.
  • India maintained supply during the Hormuz disruption by raising domestic production over 60% and sourcing from the US, Canada, and Algeria.
  • India's domestic LPG consumer prices remain among the lowest globally, below those of Pakistan, Nepal, Bangladesh, Sri Lanka, the US, Australia, and Canada, according to the Ministry.

Sources Consulted

  • ANI News (aninews.in) - "LPG cylinder supply cost has risen to over Rs 1,600, government absorbs Rs 700 under-recovery amid increase in Saudi CP: Petroleum Ministry", June 7, 2026
  • The Statesman (thestatesman.com) - "India keeps LPG cylinder price among world's cheapest despite Rs 1,600 supply cost and Rs 700 loss on every refill amid global crisis", June 7, 2026 (source URL provided)
  • Free Press Journal (freepressjournal.in) - "Domestic LPG Supply Cost Crosses Rs 1,600 Per Cylinder, Government Absorbing Nearly Rs 700 Loss On Every Household Refill", June 7, 2026
  • Asianet Newsable (newsable.asianetnews.com) - "LPG cylinder cost crosses Rs 1,600 amid Hormuz crisis; govt absorbs hit", June 7, 2026
  • Telangana Today (telanganatoday.com) - "Supply cost of domestic LPG cylinder rises to over Rs 1,600 amid West Asia crisis", June 7, 2026
  • New Kerala (newkerala.com) - "LPG Price Hike: Govt Bears Rs 700 Loss Per Cylinder as Cost Soars", June 7, 2026
  • India.com (india.com) - "LPG, PNG prices June 6, 2026", June 6, 2026
  • Ministry of Petroleum and Natural Gas, Government of India (official statements as reported by ANI)

Author: Top India News Staff

Publisher: Top India News