Oil companies plan to hike LPG, Kerosene prices

National oil marketing companies—IOC, HPCL and BPCL —will shortly implement a hike in the price of LPG (cooking gas) and kerosene, which are currently being subsidised by the government. While the exact quantum of the hike is yet to be finalised, the price of these two fuels will be increased in phases. It is significant to point here that even after the dismantling of administered pricing mechanism, the government decided to continue with subsidies on these two products. But at the same time, it was also decided that subsidies on LPG and kerosene will be provided on a specified flat rate basis every year.

Senior government officials disclosed that the ministries of petroleum and finance are giving final touches to a mechanism which will address the issue of subsidies on LPG and kerosene, being provided on a specified flat rate basis. Petroleum Secretary B.K. Chaturvedi said the mechanism will be finalised within a fortnight.

Giving details of the mechanism, officials explained that as for the current fiscal, the subsidy on LPG and kerosene has been fixed at Rs 4,495 crore. However, due to the recent spurt in international crude oil prices, the actual subsidy bill for these two fuels is estimated to be around Rs 6,000 crore for this fiscal, which is around Rs 1,600 crore more than what has been provided in the Budget.

‘Under the new mechanism, it has been decided that the difference in subsidies allocated in the Budget and the actual subsidy bill will be met through a combination of a price hike and allocations from supplementary grants,’ officials said. The international LPG price in last six months has gone up from $200 per tonne to $255 per tonne. This $55 per tonne hike translates into an increase of Rs 45 per cylinder (ex-storage price).