Oil Marketing Companies (OMCs) continue to face significant financial strain from LPG under-recoveries even as the government prepares to release subsidies over the coming months, according to a report by Nuvama Research.

The report estimates current LPG-related losses for OMCs at Rs 537 billion. The companies are expected to receive Rs 300 billion in LPG subsidy, disbursed in 12 monthly tranches, compared with cumulative under-recoveries of Rs 537 billion as of September 2025. The equal monthly instalments, scheduled to begin in November 2025, will be accounted for directly as revenue.

However, Nuvama warned that under-recoveries are likely to rise further. Regional LPG prices typically increase in winter, and the announced subsidy would cover only about 56 per cent of the existing losses. This means the financial gap for OMCs is set to widen despite government support.

LPG under-recovery refers to the loss incurred when the cost of sourcing or importing LPG exceeds the retail price charged to consumers. Government subsidies offset part of this gap, but the current levels fall short of covering the full burden.

The report added that OMC capital expenditure is expected to remain elevated due to long-gestation infrastructure projects, putting pressure on return ratios in the near term. It also noted potential de-rating in city gas distribution (CGD) company valuations amid policy uncertainty.

On the upstream side, the report described ONGC’s production guidance as optimistic, noting that the company has missed its targets for seven consecutive years. It also remained cautious on GAIL due to soft demand conditions and continued volatility in its marketing earnings.

Overall, the report highlighted rising challenges across the oil and gas sector, with subsidy support offering only partial relief amid expanding under-recoveries and broader sectoral uncertainty.