Govt hikes LPG subsidy for Ujjwala beneficiaries by 50% to Rs 300 per cylinder

#Cabinet has raised the subsidy amount for Pradhan Mantri Ujjwala Yojana beneficiaries from Rs 200 to Rs 300 per LPG cylinder

– Union Minister @ianuragthakur #CabinetDecisions pic.twitter.com/pgu85Hpg6B

— PIB India (@PIB_India) October 4, 2023

With Wednesday’s decision, a 14.2-kg domestic LPG cylinder in Delhi will effectively cost Rs 603 for PMUY beneficiaries, while for other domestic consumers, it will continue to be priced at Rs 903. Under the PMUY, beneficiaries pay the full price for the cylinders and the subsidy is transferred to their bank accounts by public sector oil marketing companies (OMCs), for up to 12 refills in a year. The government compensates the OMCs for the subsidy payout.

Ahead of the Assembly polls, the Congress has promised to provide LPG at Rs 500 per cylinder in Madhya Pradesh if voted to power. Its government in Rajasthan has already cut the effective price to Rs 500 per cylinder for poor households by providing additional subsidy support. Both these states, along with Chhattisgarh, Telangana and Mizoram, are going to polls later this year. The Opposition parties had been criticising the government for high fuel prices, particularly those of cooking gas.

As per official data, there are currently around 9.6 crore households covered under the PMUY and the average LPG refill rate under the scheme was 3.71 cylinders for 2022-23 in terms of 14.2-kg cylinders. Assuming the beneficiary base and the cylinder refill rate remains constant, the decision to raise cooking gas subsidy could cost the government around Rs 3,600 crore on an annualised basis. This translates to around Rs 1,800 crore for the remainder of the current fiscal ending March.

In the Union Budget for 2023-24, the government provisioned Rs 7,680 crore as cooking gas subsidy for the fiscal, assuming a per-cylinder subsidy of Rs 200. With Wednesday’s decision, the final subsidy burden for the fiscal is likely to be higher than the budget estimate.

The PMUY, which was launched in 2016, was seen as one the key welfare schemes that helped the Bharatiya Janata Party return to power at the Centre in 2019. The scheme has played a key role in taking LPG coverage to near saturation in India. The key objective of the PMUY is to discourage poor households from using conventional cooking fuels like firewood, which are a cause of household pollution and have an adverse impact on health.

According to the latest National Sample Survey Office (NSSO) report, LPG is the primary source of energy for nearly 50 per cent of households in rural areas and about 90 per cent of urban households across India.