Prime Minister Narendra Modi would appear to have sounded the poll bugle for 2024 by announcing a Rs 200 reduction in the price of LPG cylinders. A domestic 14.2-kg cylinder costing Rs 1,103 in Delhi will, henceforth, be available at Rs 903. Poor households covered under the Pradhan Mantri Ujjwala Yojana, that receive a Rs 200 subsidy on every cylinder and account for 9.6 crore out of the total 31.4 crore active domestic LPG consumers, will pay Rs 703. What is notable about the announcement — Modi called it a “gift to crores of my sisters on the occasion of Raksha Bandhan” — is the timing: Lok Sabha elections are scheduled only in April-May. While polls to five state assemblies are also slated later this year, the sense of urgency seems more discernible this time than in 2019. After all, the popular PM-Kisan scheme, providing Rs 6,000 as direct cash transfer to all farming families, was launched barely two months before the first phase of the national election then.
The difference probably has to do with inflation — “mehengai” was not much of an issue in 2019. Retail food inflation averaged just 0.4 per cent year-on-year in the 12 months leading to the elections of April-May 2019. That isn’t the case now, with the latest consumer food price inflation number for July at 11.5 per cent. The monsoon turning out not so good — this August has been the driest in over a century — has aggravated those worries. No party in power would want mehengai to be a talking point among voters. This is more so with the current government that has had an overall good record on inflation control. Anchoring inflation expectations is something that not only the Reserve Bank of India has accorded priority to, but this government too has acknowledged as good economics making for good politics. LPG cylinder price, rightly or wrongly, does influence consumer inflation sentiment, particularly among the poor and lower middle class, for whom it is an aspirational product.
But it isn’t LPG alone. Retail prices of petrol and diesel haven’t been raised since May 2022. Oil marketing companies being asked to also take price cuts on these could follow next. The cost of it will ultimately fall on the exchequer; so would a higher payout, say Rs 9,000, under PM-Kisan. Nor can one rule out more drought relief and higher crop losses of farmers that may again have to be covered by the government. All this will put further pressure on the finances of both the Centre and the states, forcing them, in turn, to slash budgeted capital expenditures. With the poll season starting so early and set to continue over the next nine months, the fiscal implications cannot be ignored.
