Cooking gas LPG price on Wednesday was hiked by a steep Rs 144.5 per cylinder, due to spurt in benchmark global rates of the fuel. 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 Rs 858.50 in New Delhi, Rs 896 in Kolkata, Rs 829.50 in Mumbai and Rs 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 the 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 Rs 557 with the government providing Rs 157 as subsidy directly into the account of eligible consumers. With the revised prices, the government's subsidy under direct benefit transfer (DBT) to eligible consumers would increase to over Rs 300 per cylinder with the PMUY customers getting about Rs 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 Rs 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 Rs 225 to Rs 1,466 here.
According to the revised prices, which will be applicable from Wednesday, the 19 kg cylinder will cost Rs 1,589 in Chennai, Rs 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, the government may have to provide more as oil subsidy for FY20. As per revised estimates for FY20, an amount of Rs 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 Rs 35,605 crore in FY21.
The oil marketing companies (OMCs) incurred gross under-recoveries of Rs 43,300 crore in FY19, of which LPG accounted for Rs 31,500 crore (73 per cent). In the 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.