A sharp reduction in LPG prices erases the government subsidy in meters

NEW DELHI: The collapse in international prices for oil and petroleum products on Friday erased the government from national refills and cut the price of each cylinder by between 22% and 25%, depending on state taxes, providing relief to consumers and government while dealing with the coronavirus pandemic.

This is the third consecutive monthly reduction in LPG prices prompted by declining international rates. The market and subsidised prices of a 14.2-kg cylinder are now the same. The price equilibrium has also been hastened by the government ’s move in 2019 to quietly raise the price of a subsidised cylinder by Rs 35.55 in five months between October-November 2019 and March this year.

As a result, the government will not have to transfer any subsidy into the bank account of consumers in the four metros who book cooking gas refills. In other regions or areas, the subsidy will be only Rs 4-5 due to higher delivery or local tax, sources told TOI.

In Delhi, the reference market, state fuel retailers reduced the price by Rs 162.50, or 22%, to Rs 581.50. Due to variations in state taxes and other charges, Chennai will see the largest reduction of Rs 192 per cylinder, or 25%; followed by Kolkata at Rs 190, or 24%; and Mumbai Rs 135, or 18%.

This is an indication of the gains India stands to make from the crash in crude and refined products prices. The savings will enable the government to spend on welfare schemes for the needy, such as providing three free cylinders to the 8 crore poor households enrolled in the Ujjwala LPG plan.

The budget had allotted Rs 37,256.21 crore for LPG subsidy in 2020-21, 9% more than Rs 34,085.86 crore revised estimate for 2019-20. All consumers have to pay the market price of a cylinder upfront. The government transfers the subsidy directly into the account of eligible consumers, which will not be needed this month.