LPG to cost Rs 16 more

NEW DELHI, Jan 31: Literally taking off from where it left a few days ago, the Government today decided to launch another attack against ...

NEW DELHI, Jan 31: Literally taking off from where it left a few days ago, the Government today decided to launch another attack against the mounting subsidy bill, this time by reducing the subsidy on domestic cooking gas by close to 30 per cent, or Rs 700 crore in a full year. But since over 40 per cent of the reduction in subsidies will have to be borne by the oil companies, the impact on the consumers will be less ex-storage point, the prices of an LPG cylinder will go up by Rs 14.

Inclusive of local taxes, the amounts will vary from city to city. In Delhi, the hike will be Rs 16, in Mumbai Rs 16.05, in Chennai Rs 16.65 and in Calcutta it will be Rs 18.40. Based on current LPG prices, that means an average hike of around 10 to 12 per cent.

Under the current formula, the Government pays the oil companies a fixed subsidy under what is called the Cylinder Compensation Scheme. What has been done today is to reduce the CCS by Rs 10 per cylinder.

By doing this, the Government has managed to honour thecommitment made by the UF government to reduce subsidies on LPG by a third this year but has still kept the burden on the consumer to a minimum. The UF had decided to de-regulate the oil sector in a phased manner till the year 2002. Under this formula LPG subsidies were to be reduced by a third each year, till only a subsidy of 15 per cent was left. After today8217;s cut of Rs 24 in the subsidy per cylinder, the subsidy that the government continues to bear is Rs 61 per cylinder. Given the current cost of an LPG cylinder to the government, that means around 28 per cent of the cost of LPG is still subsidised. Based on this year8217;s target for fresh LPG connections, and overall sales of four million tonne of LPG, had prices of LPG not been raised, the subsidy would have been Rs 2,400 crore. After today8217;s cuts, the subsidy will be around Rs 1,700 crore. The government also announced its resolve not to roll back any of the hikes in ration prices of wheat, rice and sugar as well as the increase in prices of urea onJanuary 28. Reduction in subsidies on these commodities would result in savings of around Rs 2,700 crore that means, with today8217;s LPG hike, the government has cut the subsidy bill by Rs 3,400 crore in what could well be called the 8220;anti-subsidy week.8221;