LPG PRICE RAISED TO ~858 A UNIT
The hike might affect even those customers who are entitled to subsidies
NEW DELHI: The price of LPG was on Wednesday hiked by ~144.5 per cylinder due to a spurt in benchmark global rates of the fuel. LPG price was increased to ~858.50 per 14.2 kg cylinder from ~714 previously. This is the steepest hike in LPG rates since January 2014. However, the government nearly doubled subsidy on LPG.
NEW DELHI: The government increased the price of non-subsidised liquified petroleum gas (LPG) cylinders by around 20%, or ~144.5 each, on Wednesday — the steepest percentage increase since the start of 2014.
A cooking gas cylinder will now cost ~858.5 in Delhi following the sharp hike. Petroleum ministry officials familiar with the decision said the price hike was delayed until after the Delhi elections, whose results were declared on Tuesday.
This is not the highest ever price for LPG cylinders, but constitutes the biggest percentage increase since January 2014, when the price was increased by 21.5%. The current price is also the highest since November 2018 when each canister of cooking gas retailed for ~942.50.
The price hike will impact only a small section of the population. This is because all consumers who earn less than ~10 lakh per year are entitled to receiving subsidies on gas cylinders.
With this increase, the government has also almost doubled the amount of subsidy provided to domestic LPG consumers. While the earlier subsidy for LPG users under Pradhan Mantri Ujjwala Yojana (PMUY), under which free gas connections were offered to poor households, was ~179 and NON-PMUY users, ~158 per cylinder, the amount has now increased to ~323.50 and ~302.5, respectively.
To be sure, the hike might pinch even those customers who are entitled to subsidies. This is because LPG subsidy is transferred to the accounts of beneficiaries after they have purchased the cylinder at market prices.
According to officials in the ministry of petroleum, LPG prices are to be revised on the first day of every month. This revision was withheld in February, perhaps on account of the state election in Delhi which took place on February 8. This is not the first time a government has deviated from its charted path on revision of petroleum product prices due to political reasons.
While the date for revision of LPG cylinders is fixed, there is little clarity on how cylinder prices are calculated. Oil marketing companies declined to disclose the price determination mechanism, citing commercial reasons.
A petroleum ministry official said in reply to query from HT on LPG pricing: “Oil marketing companies determine prices of domestic non-subsidised LPG and the government has no role in this process. The government pays subsidy to the poor and the amount of subsidy will increase accordingly.”
According to executives in public sector oil companies , the domestic LPG price is benchmarked with its international rate. Because LPG pricing is not linked to international crude oil prices, there need not be a correlation in their movements.
Crude oil prices have gone down sharply in the last 15 days after the Coronavirus outbreak in China. Brent crude was trading at $55.9/barrel compared to $67/barrel at the beginning of the year. Data from the petroleum ministry shows that the average international rate of LPG (Saudi Arabia) was $567.52 / MT from 30 December 2019 to 29 January 2020. (See Chart)