The government has withdrawn its decision to raise LPG (liquefied petroleum gas) prices by ₹4 per cylinder every month as the move was seen contrary to its Ujjwala scheme of providing free cooking gas connections to the poor.
The government had previously ordered public sector oil marketing companies to raise domestic cooking gas prices by ₹4 per cylinder every month, beginning June 2016, with a view to eliminating subsidies.
The order was, however, withdrawn in October, a top source said.
Subsequently, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) have not raised LPG prices from October.
Previously, oil firms were authorised to increase the price of the subsidised domestic LPG cylinder by ₹2 per 14.2-kg cylinder per month (excluding Value Added Tax or VAT) with effect from July 1, 2016. Oil companies had hiked LPG rates on ten occasions since that go-ahead.
Every household is entitled to 12 cylinders of 14.2-kg each at subsidised rates in a year. Any requirement beyond that is to be purchased at market price.
The quantum of hike was doubled through an order dated May 30, 2017. That order authorised state-owned firms to continue to increase the effective price of subsidised domestic LPG by ₹4 per cylinder effective June 1, 2017, per month (excluding VAT), till the reduction of government subsidy to ‘nil’ or March 2018 or further orders, whichever was earlier.
The source said it was felt that raising prices was giving a contrary signal to users. On the one hand, the government was pushing for providing free cooking gas connections to the poor, but on the other, it was raising prices every month.
To correct this, the order was withdrawn, he said.
He also said there have been increases in the price of subsidised LPG even after October, mainly because of taxation issues.
The taxation issue arose after the implementation of the direct benefit transfer (DBT) scheme in which consumers are paid the subsidy amount directly in their bank accounts, which is supposed to be used to buy market-priced LPG.
“Before DBT, LPG was available with dealers at the subsidised price. VAT was levied on that subsidised price. Now, LPG is only available at market price and GST (Goods and Services Tax) is applicable on that price. Besides being higher than the subsidised price, the market price fluctuates every month, compelling changes in retail prices to account for the taxes,” he explained.
Cooking gas LPG price has been hiked by ₹76.5 in 19 instalments over 17 months.
State-owned oil marketing companies revise prices of LPG on the 1st of every month since July last year.
The price of subsidised LPG was last raised by ₹4.50 per cylinder on November 1 to ₹495.69, according to a notification issued by state-owned firms.
A 14.2-kg LPG cylinder was priced at ₹419.18 in June 2016.
According to the Petroleum Planning and Analysis Cell (PPAC) of the Oil Ministry, there is a subsidy of ₹251.31 on every subsidised 14.2-kg LPG cylinder.
Incidentally, the non-subsidised or market-priced LPG rates were raised by ₹5 per cylinder to ₹747 a bottle on December 1. Non-subsidised LPG rates have moved in tandem with their cost since December 2013.
There are as many as 18.11 crore customers of subsidised LPG in the country. These include over 3 crore poor women who were given free connections in the last one year under the Pradhan Mantri Ujjwala Yojana.
There are 2.66 crore users of non-subsidised cooking gas, including those who gave up the subsidy in response to an appeal by Prime Minister Narendra Modi.
