Government's FY27 LPG Subsidy Bill May Breach ₹1 Lakh Crore Amid Rising Fuel Costs

The Centre's LPG subsidy bill could exceed ₹1 lakh crore in FY27, creating a funding gap of around ₹70,000 crore over the ₹30,000 crore provided in the Union Budget, according to a report by PL Capital.

The report said the Budget allocation of ₹300 billion for LPG subsidy has already been exhausted at the current pace of spending. It is estimated that the subsidy loss on every LPG cylinder now stands at around ₹490. It also said that the total subsidy bill could exceed ₹1 trillion if the current trend continues.

Subsidy Spending Jumps In April-May

The report highlighted a sharp rise in the Centre's overall subsidy expenditure during the first two months of FY27. Major subsidy spending stood at ₹755.4 billion during April-May 2026, up 47% from ₹512.5 billion in the corresponding period last year.

The report said the rise in subsidy spending reflects the impact of continued uncertainty linked to the war-related situation, which has increased pressure on government finances.

Capex Likely To Stay Measured

The report expects the government to remain cautious on capital expenditure during the first half of FY27 as it seeks to keep the fiscal deficit under control instead of increasing borrowings. Capital expenditure reached ₹2.5 trillion as of May 2026, compared with ₹2.2 trillion in the same period last year, marking a 13% year-on-year increase.

The report noted that the comparison comes against a high base. Capital expenditure in the corresponding period of FY26 had risen 54% year-on-year as spending was front-loaded early in the financial year.

According to the report, the government's effort to contain the fiscal deficit, along with rising subsidy commitments led by LPG support, may keep capital spending measured during the first half of FY27.

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