According to persons with knowledge of the situation, India intends to pay the state-run fuel merchants, such Indian Oil Corp., roughly 200 billion rupees ($2.5 billion) to partially make up for losses and control cooking gas costs.

While private firms like Reliance Industries Ltd. have the freedom to take advantage of stronger fuel export markets, state oil corporations are required to purchase crude at international rates and sell it domestically in a price-sensitive market.

About half of India’s liquefied petroleum gas, which is typically used as cooking fuel, is imported. According to India’s Oil Minister Hardeep Singh Puri, on September 9 the retail price in Delhi climbed by 28% while the Saudi contract price, the import benchmark for LPG in India, increased by 303% over the previous two years.