India plans to pay about 200 billion rupees ($2.5 billion) to the state-run fuel retailers, such as Indian Oil Corporation to partly compensate them for losses and keep a check on cooking gas prices, according to people familiar with the matter. State oil companies are obligated to buy
crude at international prices and sell locally in a price-sensitive market, while private players such as Reliance Industries Ltd. have the flexibility to tap on stronger fuel export markets. India imports about half of its liquefied petroleum gas, generally used as cooking fuel. The price of Saudi contract price, the import benchmark for LPG in India, has increased 303% in the past two years, while the retail price in Delhi was increased by 28%, India’s Oil Minister Hardeep Singh Puri said on Sept. 9.
Representatives for India’s finance ministry and oil ministry declined to comment. The companies, which include Bharat Petroleum Corp. and Hindustan Petroleum Corp., have also been holding down pump prices of gasoline and diesel since early April to curb accelerating inflation. The oil companies will require some intervention either through price increases or government compensation to cover sustained losses, Bharat Petroleum Chairman Arun Kumar Singh said last month.