Price of liquid petroleum gas (LPG) cylinders has increased again. In the sixth straight monthly increase in rates since June, the price of subsidised LPG gas cylinder was hiked on October 31 by Rs 2.94 per cylinder and Rs 60 for the non subsidised category. Petroleum ministry sources said that this increase is largely due to tax impact on the change in base price of LPG. In effect, since June, LPG rates have gone up by Rs 14.13 per cylinder for those who get subsidy. With the tax tweak for 14.2-kg subsidised cylinder last night, it now costs Rs 505.34 compared to Rs 502.40 earlier.
As per government rules there are two categories of LPG consumers – subsidised and non-subsidised. Both have to buy the cylinders at market price. The subsidised category are entitled to get subsidy amount directly to their connected bank account for a maximum of 12 cylinders of 14.2-kg each per households in a year. There are 26 crore LPG customers, of which 25.7 crore are in the domestic category. The tax on LPG changes every month, depending on the fluctuation in the average international benchmark LPG rate and foreign exchange rate. With every increase in the international rates, the Goods and Services Tax (GST) on LPG is calculated not on the base price but market price changes.
With every hike, the government has been providing higher subsidy via the direct benefit transfer scheme to subsidised customers. However, the non-subsidised category has no such protection. They pay the market price plus the GST on market price. That’s why this time the cost per cylinder for them has gone up by a whopping Rs 60. Last month’s hike was Rs 59 per cylinder. This means in little over a month LPG cylinder price for non-subsidised category has gone up by Rs 119 per cylinder and now costs Rs 880. This is a setback especially for people who responded to PM Modi’s call to “give up subsidy” in 2015.
By the end of last fiscal over 1 crore had given up their LPG subsidies. For the subsidised category, the actual impact on every subsidised domestic LPG cylinder is only Rs 2.94. In the process the non-subsidised customer will now get Rs 433.66 per cylinder compared to Rs 376 per cylinder in last month. Rising fuel prices are a matter of concern for the govt as the impact of the subsidy saved from the “give up” campaign is being wiped off by the higher support it has to give due to increasing market price. Additionally, free connections under the extremely popular Ujjwala Yojana are costing the govt more.