The sharp rise in LPG under-recovery at India’s public-sector oil marketing companies is more than an accounting problem. It shows how a disruption in an international shipping route can move through import bills, tanker availability and retail pricing before appearing on the balance sheets of companies supplying an essential household fuel. In August 2026, cumulative under-recovery on LPG rose by roughly 5 per cent from the previous month to more than ₹62,000 crore, according to a report by The Hindu BusinessLine.
The immediate cause was the widening gap between international LPG prices and the prices at which retailers continued to sell cooking gas. Under-recovery refers to the amount oil marketing companies do not recover when the administered or supported retail price of a product remains below its market-linked cost. For urban households, that mechanism can make prices appear stable even when the supply chain underneath is becoming more expensive. For the companies, the difference accumulates as a financial burden.
The reported numbers show how quickly that burden changed. Under-recovery was around ₹721 per cylinder in June, before falling to approximately ₹500 a cylinder a month later. It stood at about ₹188 per cylinder in August and had risen to roughly ₹210 in the current month, the report said. On a cumulative basis, the losses increased from around ₹51,000 crore in June to more than ₹62,000 crore in August.
That movement cannot be separated from the conflict in West Asia and the resulting disruption around the Strait of Hormuz. Before the conflict began on February 28, India imported about 60 per cent of its LPG consumption, with roughly 90 per cent of those imports transiting the Strait of Hormuz. This created a supply chain in which a geographically concentrated maritime route became important to the availability and cost of a basic urban utility.
The issue is not simply that India imports LPG. It is that the country’s import exposure is combined with a retail system that can delay the transmission of international prices to consumers. That arrangement may protect households from immediate price spikes, but it also means that public-sector companies absorb the difference when costs rise. The reported under-recovery therefore captures both an energy-security vulnerability and a fiscal choice about who bears the cost of keeping cooking fuel affordable.
India’s import volumes indicate the extent of the disruption. LPG imports rose to a six-month high of 1.3 million tonnes in August, increasing by roughly 50 per cent from July. Yet the August volume was nearly 33 per cent lower than a year earlier. Higher monthly imports, in this context, did not necessarily mean a healthier supply chain. They reflected an effort to restore or maintain availability after the severe constraints reported during May and June.
The cost of obtaining each tonne also varied sharply through the disruption. A back-of-the-envelope calculation cited in the report found that India procured roughly 1.65 tonnes of LPG for every $1 million spent in August, similar to the rate in March. In April, the same amount purchased around 1.39 tonnes. During May and June, when supply through the Strait of Hormuz was described as being completely choked off, the quantity fell to approximately 1.17 tonnes and 1.18 tonnes respectively.
These figures offer a useful way to understand supply disruption. Import availability is not measured only by the number of cargoes arriving. It is also shaped by the price paid for those cargoes, the route they take, the ships available to carry them and the time required to bring them to Indian ports. A supply chain can therefore show a recovery in volume while remaining financially stressed.
The supplier mix changed as Indian buyers sought alternatives. The United States was India’s largest LPG supplier in August, contributing about 0.62 million tonnes, after supplying 0.89 million tonnes in July, according to OPEC data cited by The Hindu BusinessLine. The US, which had been India’s fifth-largest LPG supplier until January 2026, moved up to fourth place a month later after replacing Kuwait. Following the outbreak of the conflict, it became India’s top supplier for five consecutive months beginning in March.
That diversification reduced dependence on a single regional source, but it did not eliminate exposure to international volatility. US LPG is linked to Mont Belvieu prices, which stood at $0.68 a gallon in August, equivalent to around $360 a tonne. That benchmark is generally lower than Saudi contract prices, but the advantage can be narrowed by the longer voyage to India.
Freight became a decisive part of the delivered cost. Equirus Securities, cited in the report, said Houston-to-Asia very large gas carrier freight exceeded $200 a tonne in mid-April and rose above $300 in August as stronger eastbound demand tightened vessel availability. US-to-Asia LPG flows consequently declined from around 4.8 million tonnes in July to approximately 4.2 million tonnes in August and were estimated to fall further to 3.6 million tonnes in September.
This is the institutional complication behind the apparent shift to a new supplier. Diversification is often treated as a straightforward form of resilience: if one source is disrupted, another can replace it. But replacement suppliers may involve longer routes, higher freight costs and different price benchmarks. The physical availability of LPG may improve while the cost of maintaining that availability rises. For Indian oil marketing companies, the result is a larger gap between procurement cost and retail realisation.
Regional pricing added to that pressure. Constrained supply pushed Saudi Arabia’s September propane contract price up by $5 a tonne to $625, according to the report. With higher international prices and freight costs continuing to feed into procurement, Equirus Securities expected sourcing costs for Indian oil marketing companies to keep accumulating.
The financial burden has a direct connection to urban life because LPG is not an optional infrastructure service for most households using it. It is part of the everyday operating system of cities: food preparation, small eateries, restaurants, canteens and household routines all depend on reliable access to cooking fuel. When retail prices are insulated from international movements, the protection is visible to consumers, while the cost is distributed through company finances and, potentially, public support mechanisms.
The episode also exposes a distinction between supply security and price security. The shift towards US cargoes suggests that India can alter its supplier base when established routes become difficult. But the rising under-recovery shows that securing cargoes is not the same as securing affordable delivered fuel. A resilient energy system must manage both the physical movement of fuel and the financial mechanism through which it reaches consumers.
The numbers reported for June, July and August also show why monthly data matters. The per-cylinder under-recovery fell substantially from June to August before rising again in the current month, while cumulative losses continued to climb. A temporary improvement in the cost of a single cylinder therefore did not reverse the overall accumulation of losses. This distinction is important for assessing whether a disruption is ending or merely changing form.
The current structure places several responsibilities across different institutions. Oil marketing companies procure and distribute LPG; international suppliers and shipping markets determine much of the delivered cost; public policy influences the retail price paid by consumers; and geopolitical events can affect the routes connecting these systems. No single actor controls the entire chain. The under-recovery is the point at which those separate systems meet.
The report does not establish how the accumulated under-recovery will ultimately be financed or whether the current retail pricing arrangement will change. It does establish that the cost burden has grown even as India increased imports and diversified suppliers. That combination is the central lesson of the episode: additional cargoes and new sources can restore supply without restoring financial stability.
For cities, the issue to monitor is whether the disruption remains an exceptional shock or becomes a recurring cost of operating an import-dependent cooking-fuel system. The next indicators are the monthly under-recovery per cylinder, cumulative losses at public-sector oil marketing companies, LPG import volumes, supplier shares, freight rates and regional contract prices. Together, they will show whether India’s LPG network is moving towards normalisation or simply absorbing a more expensive version of normal supply.
