Oil ministry looking to restore subsidized LPG prices, says survey

Oil ministry looking to restore subsidized LPG prices, says survey

The Ministry of Petroleum and Natural Gas is evaluating the extent to which subsidy on Liquefied Petroleum Gas (LPG or LPG) will be restored. According to a senior government official with knowledge of the matter, a survey is currently being conducted to find out at what price more and more consumers will buy domestic cylinders. An option is also being considered to restrict any subsidy distribution to the Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries only.

This was needed after the fall in global LPG prices and the government abolished LPG subsidy in May 2020. During that time the cost of a domestic 14.2 kg LPG cylinder in the national capital was Rs 581.50. Since then there has been a steady rise in prices but LPG subsidy has not resumed. A domestic LPG cylinder now costs Rs 884.50 in Delhi, which is the highest ever price of a ‘subsidised’ LPG cylinder.

While Delhi has zero subsidy on domestic cylinders, the Center continues to subsidize freight costs in some states. The exact amount of subsidy varies in each case, but it is roughly less than Rs 30. This is being done to bring uniformity in the effective price of a domestic cylinder across the country.

“At present a survey is being conducted to find out the extent to which consumers can comfortably buy domestic LPG cylinders. LPG is a rarity in India and the government intends to continue to control prices.

“The government is monitoring the current prices and looking for trends that show a decline in consumption. Since PMUY beneficiaries are considered to be the financially weakest, an option is being considered to give any fresh subsidy allocation only to them. The quantum of subsidy to be given and the effective price of the subsidized LPG cylinder will be decided after the results of the survey.

It is expected that by March 2022, there will be 30 crore LPG consumers in India. Of these, about 207.2 million will be non-PMUY (or regular) LPG consumers in the country. Under the present arrangement, all the consumers are bearing the full cost of LPG cylinder for one refill.

To reduce the burden on consumers, the government regulates the price of domestic LPG cylinders sold by Public Sector Undertaking (PSU) companies through budgetary subsidy. This subsidy amount is transferred to the accounts of the consumers after purchase. The Center also determines the selling price of domestic LPG by three PSUs, Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL), which have more than 95 per cent market share. share.

LPG Price for Bharat Gas Consumers under a privatized BPCL

Despite some apprehensions about cost disallowance and notional losses, oil PSUs follow the Centre’s directions on LPG price. But with the privatization of BPCL on the cards, there are chances that the new owner may not listen to the Centre’s instructions. It’s not that PSUs don’t sell oil on margin, but they or any new private entity will certainly be looking for more.

This has left around 84.5 million cooking gas consumers of Bharat Gas, the LPG division of BPCL, confused. Of these, over 21 million are covered under PMUY, indicating even greater sensitivity to high prices.

But the Oil Ministry officials want to keep the prices of Bharat Gas LPG under control. “Whoever buys BPCL will have to adhere to the prices fixed by the Center for the domestic users eligible for the subsidy. Bharat Gas has a major share in the domestic market and consumers are price sensitive.

In December 2015, the Center withdrew LPG subsidy to those with taxable income above Rs 10 lakh per annum. Officially, everyone else is still eligible to get LPG subsidy from the annual budgetary allocation.

“The subsidy will continue for eligible BharatGas consumers and the new owner will also have to maintain the effective price to the beneficiaries. So, if Indane (LPG division of IndianOil) and HP Gas (LPG division of HPCL) are selling a domestic cylinder for Rs 900 (effective price after subsidy) in a city, BharatGas consumers will get Rs 900 for the same category. But will keep getting. Number of beneficiaries, even after privatization of BPCL,” said the official.

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