India’s oil marketing companies saw earnings weaken in the first quarter of FY27 after reporting strong profitability in FY26, due to marketing losses and high LPG under‑recoveries, a new report has said.
The gross refining margin has improved, high LPG under-recoveries eroded gains, the report from CareEdge Ratings said.
The three major OMCs faced combined under-recoveries of around Rs 13,700 crore in Q1FY27, post-adjusting for the compensation of Rs 7,500 crore, due to selling LPG below the market-determined price.
Total LPG under‑recoveries rose to around Rs 61,900 crore by June 30, 2026 from Rs 48,200 crore on March 31, 2026. The agency attributed the surge to unprecedented disruptions in the global LPG supply chain following the West Asia conflict and the closure of the Strait of Hormuz, which widened the gap between sourcing costs and retail prices.
Highlighting the global price surge, the report said that Saudi Contract Price, an international LPG benchmark, jumped from an average of $530 per MT in FY26 to $785 per MT in Q1FY27 — an increase of almost 50 per cent.
It has subsequently dropped to $592 per MT in July 2026 and $632 per MT in August 2026 with relative ease in the supply chain.
The firm said India, which imports about 60 per cent of its LPG, rapidly diversified sourcing away from West Asian suppliers to the United States and other markets, but incurred significantly higher landed cost
To partially offset the surge in LPG procurement costs during Q1FY27, domestic LPG prices were raised by Rs 89 per 14.2 kg cylinder.
LPG sourcing cost has reduced on the back of decline in Saudi CP price from July 2026. Consequently, the LPG under-recoveries are expected to fall by roughly 40 per cent sequentially in Q2FY27.
