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No LPG subsidy for 3 months due to favourable oil market

New Delhi: You may not have noticed it but the price of subsidised cooking gas rose by an average of just less than Rs 10 per cylinder per month in the July-June 2019-20 period, taking the price of common man’s fuel closer to market rates.

What this has done is to stop consumers receiving any subsidy in their accounts for buying domestic LPG cylinders at market rates for the past three months, believing low oil prices in the market has eliminated the need for the subsidy.


But had oil companies refrained from consistently raising the price of subsidised cooking gas as well, from a level of Rs 494.35 a cylinder in July last year to Rs 594 now, a 14.2 kg domestic LPG cylinder price would have been more than Rs 100 cheaper, providing relief to consumers during the Covid-19 pandemic.

Under the direct benefit transfer scheme (DBT), the government provides subsidy on 12 cylinders a household uses in a year. While consumers buy cooking gas at market rates, the calculated subsidy amount is transferred directly into their accounts.

“Together with frequent increase in price of subsidised cooking gas and a fall in global oil and product prices, the government has completely eliminated their oil subsidy burden on account of LPG since May this year. With oil prices expected to be range blind closer to current levels, the government may not need Rs 37,256 crore as LPG subsidy provided in FY21,” said an energy sector expert asking not to be named.

The current price of subsidised LPG cylinder is around Rs 594, the same rate as LPG cylinder prices prevailing in the market. According to an analysis done by Emkay Global, oil companies’ under-recovery in case of kerosene has come to a naught since March while that for LPG has become zero from May.

Due to Covid-19 pandemic, the government is providing three free LPG cylinders to all below poverty line families who are subscribers of cooking gas under Ujjwala scheme. But other customers are now paying full amount for the cylinder without getting any subsidy support from the government.

“Rather than reducing their burden, the government should have brought down the retail prices of cooking gas cylinders. This would have be a big relief to families struggling to keep finances going in Covid-19 times,” said Sudhir Kumar, an Indane cooking gas subscriber who is now not getting any amount into his account as direct benefit transfer (DBT).

The government has allocated Rs 40,915 crore as petroleum subsidy for FY21, a 6 per cent increase from Rs 38,569 crore allocated for the last fiscal. Out of this, the allocation for LPG subsidy has been increased to Rs 37,256.21 crore for current year. But so far, government had to draw very little from subsidy provisions.

The good news is that with the developments in past few months, the government had completely eliminated the oil subsidy and spent the savings on other welfare activities. But this could mean that if there is any spike in LPG prices henceforth, the government may pass a portion of the burden on consumers by raising LPG prices. (IANS)