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Prices of subsidised LPG zoom 16% since Modi took charge

By Shine Jacob
August 04, 2017 14:44 IST
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Global crude oil prices have slumped by 49 per cent during the same period

The prices of subsidised cooking gas zoomed by 16 per cent, from Rs 414 per cylinder when the Bharatiya Janata Party (BJP) government came to power in May 2014 to Rs 479.77 in August 2017, despite global crude oil prices dipping by about 49 per cent.

The Narendra Modi-led government had stormed to power in 2014 on the back of serious corruption charges against the Congress-led regime and the rise in prices of commodities like cooking gas, against which the BJP had raised its voice.

Interestingly, the price of liquefied petroleum gas (LPG) was revised 22 times by oil marketing companies (OMCs) like Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) since May 2014, when the BJP government took charge.

However, on the back of a 49 per cent drop in international crude prices, from $102.71 a barrel on May 30, 2014, to $52.16 (Brent crude) on August 3, 2017, prices of non-subsidised cylinders dipped 44 per cent, from Rs 928.50 per cylinder in May 2014 to Rs 524 in August 2017.

Also, in an effort to reduce the subsidy burden or to completely do away with the subsidy, OMCs are authorised to increase prices of subsidised domestic LPG cylinders by Rs 4 per month till March 2018.

"The government stands committed and will continue to provide subsidy assistance to the needy and poor households," said a person close to the development.

The subsidy amount on a 14.2-kg cylinder transferred to the accounts of Delhi consumers stands at Rs 86.54 currently, which the government wants to do away with or reduce to the range of Rs 40 per cylinder by March 2018.

The current national average of LPG subsidy per cylinder comes to the tune of about Rs 58 per cylinder.

This comes at a time when the Modi government is increasing the penetration of LPG through the Pradhan Mantri Ujjwala Yojana, by providing 50 million new connections to women belonging to below poverty line (BPL) families over a period of three years, starting from financial year 2016-17.

So far, over 25 million connections have been given under the scheme.

"With the expansion of LPG coverage, it is an imperative to rationalise the subsidy component so as to ensure that while the needy and poor are fully protected, at the same time, the affluent households should pay little more price given their rising income and higher paying ability," the aforementioned person added.

In July 2016, Delhi was declared a kerosene-free city.

If you consider the prices prevailing in Kolkata, from May 2014 up till now, they have also seen a 57 per cent surge, from Rs 14.9 per litre to Rs 23.36 per litre.

In the past three years, the total number of households having LPG connections has remarkably increased from 140 million in April 2014 to 210 million in July 2017.

The LPG penetration has increased from 56 per cent to 76 per cent in that period.

According to the BJP government, the step to decontrol prices was initiated by the Manmohan Singh government.

In June 2010, an empowered group of ministers met under the chairmanship of then finance minister Pranab Mukherjee to look into the issue.

"It was in this meeting that it was decided that the price of domestic LPG will be increased by Rs 35 per cylinder in Delhi, with corresponding increases in other parts of the country.

Thereafter, the price would be periodically revised based on the increase in paying capacity as reflected in the rising per capita income," said the person.

Interestingly, all key Opposition leaders, including Sharad Pawar, Mamata Banerjee, Kamal Nath, Sushilkumar Shinde, Murli Deora, and M K Alagiri, were present at that meeting.

In June 2010, petrol prices were deregulated and linked to international markets, which was followed by diesel prices in October 2014.

However, despite these hikes, LPG prices in India remain below international standards.

A steady rise

  • It was an Empowered Group of Ministers, led by then FM Pranab Mukherjee, that cleared the decontrol initiative
  • In June 2010, petrol prices were deregulated and linked to international markets
  • In October 2014, diesel prices too were deregulated
  • The govt launched the Pradhan Mantri UjjwalaYojana in May 2016 to provide LPG connections to 50 million women belonging to poor households
  • In the past three years, LPG penetration has increased 56-76 per cent

Photograph: Rupak De Chowdhuri/Reuters

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Shine Jacob in New Delhi
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