After Delhi polls, LPG price hiked by ₹144 per cylinder

A day after the poll process in Delhi concluded, the prices of the LPG cylinders were hiked by a steep Rs 144.50 per cylinder on Wednesday taking the price to ₹858.50 per cylinder.

This was one of the steepest increases in the LPG prices in over five years.

A non-subsidised 14.2 kg cylinder will now cost ₹858.50 in New Delhi, ₹896 in Kolkata, ₹829.50 in Mumbai and ₹881 in Chennai.

Usually LPG prices are revised on the first of every month, however, amid Delhi elections the process seems to have been deliberately delayed.

With the increase, the subsidy burden for the government will also jump by almost 100 per cent with Centre deciding against revising the price of subsidised cooking gas cylinder provided to households and those receiving LPG connection under the Pradhan Mantri Ujjwala Yojana (PMUY).

The price of subsidised LPG cylinder (14.2 kg) currently works to around ₹557 with government providing ₹157 as subsidy directly into the account of eligible consumers. With the revised prices, government's subsidy under direct benefit transfer (DBT) to eligible consumers would increase to over ₹300 per cylinder with the PMUY customers getting about ₹312 into their accounts now.

An official of a public sector oil company said on condition of anonymity that even common man using LPG cylinder would not be spared from a price hike as the amount of actual subsidy would not cover for the increase in the GST post revision of prices. This would mean that they would receive between ₹5-10 less per cylinder into their accounts as cash transfers from the government for buying cooking gas at market price.

Along with 14.2 kg cylinder, the oil companies have also increased the price of 19 kg cylinders by ₹225 to ₹1,466 here.

According to the revised prices, which will be applicable from Wednesday, the 19 kg cylinder will cost ₹1,589 in Chennai, ₹1,416 in Mumbai and ₹1,540 in Kolkata.

LPG cylinders are sold at market prices, but the Central government subsidises 12 cylinders for each household per year by providing direct subsidy.

With the sharp increase in subsidy per cylinder now, government may have to provide more as oil subsidy for FY20. As per revised estimates for FY20, an amount of ₹29,627.76 crore has been provided towards DBT for LPG.

The Union Budget 2020, increased the subsidy under the DBT scheme for LPG to ₹35,605 crore in FY21.

The oil marketing companies (OMCs) incurred gross under-recoveries of ₹43,300 crore in FY19, of which LPG accounted for ₹31,500 crore (73 per cent). In case of kerosene, the subsidy support has already fallen and with states targeting the flow of fuel through the PDS system, this subsidy could also be taken off.