Subsidised LPG price goes up by Rs 82 in last 5 years

New Delhi: It may be bad news for the consumers across the country as LPG, or liquefied petroleum gas, prices were hiked with effect from Wednesday. Though the price increase was minimal this time, the cumulative effect of price hikes during the last five years of the current government has been substantial.

The non-subsidised LPG rates have been increased by Rs 6 per cylinder in key metros. However, the price increase in subsidised LPG prices have been marginal at 28 paise per a 14.2-kg cylinder in Delhi and 29 paise per cylinder in Mumbai, according to data from Indian Oil Corporation (IOC), the largest fuel retail supplier.

Similarly, state-owned oil firms have also notified that aviation turbine fuel (ATF) price has been hiked by over 2.5 per cent, the third straight monthly increase.

The price of ATF was hiked by Rs 1,595.63 per kilolitre to Rs 65,067.85 per kl in the national capital. The increase comes on the back of a Rs 677.1 per kl hike in rates effected from April 1, and a steep 8.1 per cent (Rs 4,734.15 per kl) jump in prices on March 1.

An official source said, “The rise in LPG price is nothing but a reflection of the tax impact on the increased market rate of the fuel.” The source said LPG price increases are otherwise absorbed by the government.

“The dynamics of price hike on such product is that when international rates move up, the government provides a higher subsidy and when they come down, the subsidy is cut,” the sources added.

LPG consumers generally buy the fuel at the market price. The government, however, subsidises 12 cylinders of 14.2 kg each per households in a year by providing the subsidy amount directly in the bank accounts of users.

This subsidy amount varies from month to month depending on the changes in the average international benchmark LPG rate and foreign exchange rate. “So, with the rise in the market price of non-subsidised LPG price, the tax incidence on subsidised cooking fuel has also increased, leading to the current price hike,” they said.

After the price hike, a 14.2-kg subsidised LPG cylinder will now cost Rs 496.14 in the national capital as against Rs 495.86 previously.

With this increase, the price of subsidised LPG has gone up by over 82, or about a fifth, in the last five years after the BJP-led government came to power in 2014. Subsidised LPG was priced at Rs 414 per cylinder in early 2014.

A cylinder of non-subsidised LPG now costs Rs 712.50. This is the third straight increase in LPG rate.

With airlines in financial trouble as of now, the present hike in ATF rates is expected to add to the burden of airlines that are already reeling under pressure from the cut-throat competition in the sector.

LPG as well as ATF prices are revised on the first of every month based on the average international rate for benchmark fuel and foreign exchange rate in the preceding month. According to tax rules, the goods and services tax on LPG has to be calculated at the market rate of the fuel. The government may choose to subsidise a part of the price but tax will have to be paid at market rates.