By Nantoo Banerjee
It is disturbing to note that the government has chosen an easy option to raise the domestic cooking gas prices at will to benefit a handful of public sector oil companies at the cost of nearly 337-million active domestic LPG consumers. This is despite the fact that in FY 26, India’s state-run oil companies recorded a massive combined net profit of Rs.77,280.65 crore, a 130 percent jump from the previous year, with the Indian Oil Corporation (IOC) alone hitting a record annual profit of Rs.36,802 crore.
The latest hike for a 14.2-kg domestic LPG cylinder is Rs.29 effective nationwide on June 7, 2026. This is the second increase in three months, bringing the cumulative hike to Rs.89 per cylinder this year. Incidentally, the government collected roughly Rs.4,00,000 crore as tax revenues and duties from the petroleum sector alone, last year. Yet, the government does not seem to be happy. It wants more, more to benefit its oil companies than helpless domestic consumers.
Even countries such as oil-rich Saudi Arabia, Iran, Venezuela, Libya, and Malaysia offer highly subsidized petrol, diesel, and gas to shield citizens from global price inflation. These nations utilize government price caps or direct state compensation to keep energy costs artificially low, often using oil revenue to absorb the economic shock. They manage domestic prices differently. Iran offers some of the cheapest fuel in the world at approximately $0.03 per litre, backed by tens of billions in government subsidies.
Venezuela maintains similarly ultra-low near-zero petrol costs at roughly $0.04 per litre despite infrastructure and economic challenges. Saudi Arabia invests over $12 billion annually in energy subsidies to keep domestic costs stable and affordable. Libya has some of the world’s most highly subsidized and affordable petrol, diesel, and gas which frequently leads to challenges like cross-border smuggling. Malaysia heavily subsidizes its widely used RON95 fuel, though it recently adjusted policies by capping the monthly subsidized quota per citizen to relieve fiscal pressure.
Surprisingly, India, hosting the largest absolute number of poor people in any single nation, offers very little direct fuel and gas subsidies. The government’s much publicized Ujjwala Yojana connections to the ‘designated’ poor, offering those limited beneficiaries subsidy of Rs.300 per 14.2-kg cylinder, is hardly of any use as the subsidised quota is now limited to only four cylinders per year, down from earlier caps of nine. The annual designated government budget allocation for the targeted Ujjwala subsidy is only Rs.12,000 crore. However, few know about the actual government expenditure on subsidies on this account. The entitlement under the Ujjwala scheme is based on whether a family falls into a recognized Below Poverty Line (BPL) category or meets the ‘deprivation criteria’ specified by the government. Only 65.2 million families fall under the BPL category now in India, the world’s most populous country.
Every time the government raises the LPG prices, it sings the losses being incurred by three state-owned oil marketing companies (OMCs). This is despite the fact that these OMCs are all part of the giant Maharatna oil PSUs – Indian Oil Corporation Limited (IOC), Hindustan Petroleum Oil Corporation Limited (HPCL), Bharat Petroleum Oil Corporation Limited (BPCL). They are a major source of the government’s revenue. The three marketing entities essentially are the downstream oil PSUs.
The Government holds the majority or controlling stake in all of them, with cross-holdings shared by other government entities and public sector undertakings such as ONGC and Oil India. The last two companies are upstream oil PSUs while IOC, HP, and BPCL are downstream concerns. While they serve different parts of the energy supply chain, they are highly connected, often sharing equity or integrating operations to ensure the country’s energy security. In the 2025 financial year (FY25), the combined net profit of ONGC and Oil India stood at around Rs.42,650 crore.
The petroleum sector contributes significantly to government finances, accounting for approximately 14 percent of the central government’s tax revenue and 15 percent of states’ own tax revenues. During FY 2025-26, India’s state-owned oil majors collectively contributed over Rs.4.15 lakh crore, with over Rs.92,000 crore derived specifically from central exchequer contributions, Profit Petroleum, and state-owned entity dividends. The Profit Petroleum represents the share of profit from exploration and production operations paid back to the Centre. The corporate tax paid by the oil sector includes direct income taxes paid on operational revenues and high-margin refining or exploration profits. They pay large dividends to the government, the majority shareholder in all these oil PSUs, every year, apart from excise duty and VAT.
Thus, it is very unfortunate on the part of the people of India that the government has to take the shelter of the so-called losses incurred by the OMCs every time it chooses to raise the retail prices of cooking gas or LPG, the most important element for food preparations for the country’s multitude of men, women and children. The government is well aware of the sensitiveness of the issue. It never raises the prices of oil or cooking gas before central or state elections, fearing a public backlash. Despite the Iran and gulf war crisis, leading to upsurge in oil and gas prices, the government did not allow the domestic oil companies to raise the prices of oil and cooking gas ahead of the lately concluded assembly elections in five states –Tamil Nadu, Assam, Kerala, West Bengal & Puducherry.
There is no doubt that the country is passing through a difficult period as in the case of most other nations in the world due the sudden producer price hikes in the oil and gas segment and high shipping costs. Yet, if the governments of countries like Saudi Arabia and Malaysia can highly subsidise the fuel and gas prices to shield their citizens from global price inflation, there is no reason why democratic India should frequently raise the cooking gas and fuel prices just for the benefit of the three state-owned OMCs ignoring the plight of its over 1.4 billion people. (IPA Service)
