BPCL Hopeful of Compensation as Fuel Under Recoveries Mount to ₹1.88 Lakh Cr

Bharat Petroleum Corp is hopeful of getting a compensation package from the central government to cover losses on selling petrol, diesel and LPG below market rates, as the West Asia conflict pushed up global crude prices.

"We are hopeful, because in earlier precedents also the government has helped and provided financial assistance. This time also, we are hoping for receiving the compensation," VRK Gupta, Director Finance at Bharat Petroleum Corp, told Moneycontrol.

Gupta said the company has shared details of LPG under recoveries and the hit on marketing margins with the government.

Compensation Sought

State-run oil marketing companies (OMCs) have approached the government seeking compensation of close to ₹75,000 crore for losses between April and June, when crude oil prices stayed elevated, the report added.

The final amount approved may turn out to be lower, the report said citing a government official said. "The finance ministry is making an assessment, and is in touch with the petroleum ministry regarding this," the official said.

The finance ministry could clear the package by the end of August or early September, after which it would need Cabinet approval.

Past Support

The Centre had earlier given OMCs ₹22,000 crore in 2022 and ₹30,000 crore in 2025 to offset losses from selling LPG below market price. The 2025 compensation was to be released in twelve monthly tranches, and OMCs have so far received five instalments.

Union Minister for Petroleum and Natural Gas Hardeep Singh Puri had said on July 2 that OMCs lost ₹74,781 crore on the sale of petrol, diesel and LPG till June 30, as crude oil prices rose following the West Asia conflict.

According to the petroleum ministry, under recovery on petrol during April to June stood at ₹19,905 crore, diesel under recovery was ₹1.44 lakh crore and LPG under recovery was ₹24,148 crore. The cumulative under recovery for OMCs during the quarter stood at ₹1.88 lakh crore.

Adding LPG under recoveries from the previous year, the total under recovery for OMCs stands at ₹2.1 lakh crore.

Crude Prices Swing Sharply

Global oil prices moved sharply during the April to June period, tracking developments in the West Asia conflict, where periods of intense escalation were followed by a short-lived ceasefire.

Brent crude, the global benchmark, fell to around $90 a barrel on April 17 after the US and Iran announced a temporary ceasefire, but climbed to a four-year high of $126.41 on April 30 on fears of renewed fighting. The average price for the month was around $117 a barrel.

Prices stayed above $110 in the first half of May before falling to $92.05 a barrel by month end, as hopes of peace grew. In June, prices eased further, averaging around $85 a barrel.

Brent crude has seen fresh volatility this month, crossing the $100 a barrel mark on July 24, after tensions flared again in the Strait of Hormuz following the collapse of the ceasefire.