Govt defends LPG price hike

Hours after prices of domestic LPG cylinders were raised by Rs 29 per cylinder, the Union Government on Sunday defended its decision, saying Indian households continue to pay among the lowest prices for cooking gas globally, and far below the price paid in advanced economies such as the United States, Australia and Canada, despite a sharp rise in international LPG prices triggered by disruptions in West Asia.

The latest increase takes the price of a domestic LPG cylinder in Delhi from Rs 913 to Rs 942. It follows a Rs 60 increase announced on March 7, taking the cumulative rise over the past three months to Rs 89.

“Following the June contract price, the cost of supplying a 14.2 kg cylinder, were it priced on an import-linked basis, has risen to over Rs 1,600. The under-recovery now absorbed on each domestic cylinder is about Rs 700. The scale of this is visible in the fully market-priced commercial cylinder: the 19 kg cylinder used by hotels and restaurants sells in Delhi at Rs 3,113.50, about Rs 164 a kg, after five increases during the West Asia crisis. The domestic household, by contrast, pays about Rs 66 a kg after the revision.

“Commercial gas carries a higher rate of tax and larger margins, so it sits above the household’s cost-reflective level; even so, the import-linked cost of a domestic cylinder works out to over Rs 1,600,” the Government said in a statement.

The Government also argued that beneficiaries of the Pradhan Mantri Ujjwala Yojana (PMUY) will continue to pay an effective Rs 642 per cylinder after receiving a subsidy of Rs 300 per refill on the first four refills annually, down from nine refills announced last year.

The Government released a comparison of LPG prices across countries, comparing global prices to cylinders distributed under PMUY. According to the figures, an effective PMUY cylinder price of Rs 642 is lower than Pakistan’s Rs 1,046, Nepal’s Rs 1,207, Bangladesh’s approximately Rs 1,225 and Sri Lanka’s Rs 1,241. The gap is wider when compared with developed countries. Equivalent prices were estimated at around Rs 1,755 in the US, Rs 1,765 in Australia and Rs 2,411 in Canada.

The Government added that even a non-PMUY consumer paying Rs 942 continues to pay about Rs 700 less than the market-linked cost. Any household can buy as many cylinders as it needs at Rs 942.

India’s LPG import prices are linked to the Saudi Contract Price (CP), the global benchmark set by Saudi Aramco. According to the Government, the benchmark has risen by around 46 per cent since February.

“India used to import 60 per cent of its LPG requirements, and the landed cost of that import tracks the Saudi Contract Price (CP) that Saudi Aramco sets at the start of each month. This is an external price over which the Indian consumer has no control,” the Government said.