The biggest Indian state-controlled refiners that have been selling liquefied petroleum gas (LPG) on the retail market have seen their losses on these sales narrow so far in August, an Indian energy ministry official said on Monday.
Indian Oil Corporation Ltd., Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) have seen their losses narrow nearly threefold this month compared to July, India’s junior oil minister Suresh Gopi told Parliament in a written reply on Monday, carried by Reuters.
The revenue loss has now narrowed to $1.97 (188 Indian rupees) per one household cylinder of LPG, widely used as a cooking fuel in India, down from $5.25 (500 rupees) in July, the official said.
The Indian government compensates fuel retailers for their losses on sales of LPG. This compensation comes with a lag and at below market rates.
Since the beginning of the war in Iran and the closure of the Strait of Hormuz, India has been scrambling for LPG supply, part of which was trapped in the Persian Gulf.
India has boosted imports of oil and LPG from places that don’t need the Strait of Hormuz, but costs are usually higher, and the journey times are much longer compared to the shorter routes from the Persian Gulf to India.
India’s government in April urged local refiners to increase production of liquefied petroleum gas—the country’s main cooking fuel, amid the supply crunch resulting from the war in the Middle East.
Some 60% of Indian households rely on liquefied petroleum gas as their primary cooking fuel, and the blockage at the Strait of Hormuz, where 90% of all Indian LPG imports pass through, has been immediately felt by consumers.
The disruption has caused soaring prices and, as a consequence, demand destruction. The government, meanwhile, has tried to tackle the crisis by redirecting LPG supply from industrial users to household consumers to ensure availability of cooking fuel. Indian authorities are also pushing for an expansion of the city pipeline gas networks to replace LPG cylinders and use where possible.
By Charles Kennedy for Oilprice.com
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