Ahead of Lok Sabha elections, Rs 100 cut in LPG cylinder price

Following the announcement, public sector oil marketing companies (OMCs) — Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — are set to reduce LPG cylinder prices from Friday midnight. With this price reduction, the standard 14.2-kg domestic LPG cylinder would cost Rs 803 in Delhi, Rs 802.50 in Mumbai, Rs 829 in Kolkata, and Rs 818.50 in Chennai. The effective LPG cylinder price for PMUY consumers — including the subsidy benefit — would be Rs 503 in Delhi, Rs 502.50 in Mumbai, Rs 529 in Kolkata and Rs 518.50 in Chennai.

Today, on Women’s Day, our Government has decided to reduce LPG cylinder prices by Rs. 100. This will significantly ease the financial burden on millions of households across the country, especially benefiting our Nari Shakti.

By making cooking gas more affordable, we also aim…

— Narendra Modi (@narendramodi) March 8, 2024

The announcement came a day after the Union Cabinet approved the continuation of the PMUY subsidy for the financial year 2024-25 (FY25) at an estimated cost of Rs 12,000 crore.

“Today, on Women’s Day, our government has decided to reduce LPG cylinder prices by Rs 100. This will significantly ease the financial burden on millions of households across the country, especially benefiting our nari shakti,” Modi said in a post on ‘X’.

“By making cooking gas more affordable, we also aim to support the well-being of families and ensure a healthier environment. This is in line with our commitment to empowering women and ensuring ‘ease of living’ for them,” he said.

This is the second instance of the government announcing a cut in LPG prices for households in the current fiscal. Ahead of the Assembly polls in five states, a price cut of Rs 200 per cylinder was announced on August 29.

At the time, apart from the price cut, the government had also decided to provide an additional 75 lakh PMUY connections, which would take the total number of beneficiaries to 10.35 crore, in a phased manner. Then in October, the government hiked the PMUY subsidy by 50 per cent to Rs 300 per cylinder.

There are two aspects to the cut in LPG prices. First, it could help in easing retail inflation further. Second, oil prices have declined from over $100 per barrel soon after Russia’s invasion of Ukraine to $80-85 per barrel, giving the OMCs more headroom to accommodate the cut in retail prices.

Usually, OMCs bear the financial implications of price cuts, while the subsidy bill is footed by the Centre. However, there have been instances in the past when the OMCs sold LPG at reduced prices amid high international fuel price volatility, with the government later providing them with financial assistance to cover the losses incurred on that count.

According to the National Sample Survey Office (NSSO), 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 the country. As per latest available government data, the average LPG consumption of PMUY consumers has increased by 29 per cent from 3.01 refills in FY20 to 3.87 refills (till January 2024) prorated for FY24.

As per estimates based on FY23 data, LPG consumption by non-PMUY consumers was almost 145 crore cylinder refills, while for PMUY beneficiaries, it was around 36 crore refills, taking the total to around 181 crore refills. Assuming the LPG refill rates and consumer base remain similar to FY23 levels, the financial impact of the latest price cut would be around Rs 18,100 crore on an annualised basis.

The PMUY, which was launched in 2016, was seen as one the key welfare schemes that helped the BJP return to power at the Centre in 2019. The scheme has played a critical 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 major cause of household pollution and have an adverse impact on health.