LPG Under-Recoveries May Hit Rs 80,000 Crore by FY2027

Indian oil marketing companies are heading into FY2027 facing a sharp rise in LPG under-recoveries, which could hit Rs 80,000 crore, according to a new ICRA estimate. Under-recoveries occur when companies sell fuel below cost and are not fully compensated, squeezing their finances directly. The pressure stems from supply disruptions in West Asia pushing global LPG prices higher. When import costs rise but domestic selling prices stay controlled, the gap widens fast. This dynamic has worsened across multiple energy and chemical inputs, not just LPG. Fertiliser producers are also caught in the crossfire, as rising feedstock costs will require a larger government subsidy outlay to keep farm-gate prices stable. Chemical and gas sectors are seeing margin compression from the same cost inflation. For FY2027, the key watch points are how much of the under-recovery burden the government absorbs through subsidies, whether retail LPG prices are revised upward, and whether West Asia supply conditions ease. Any delay in subsidy disbursement could stress oil company cash flows and raise their borrowing needs.