India cuts residential LPG prices, extends subsidy

Market: LPG
08/03/24

India has announced a 100 rupees/14.2kg cylinder ($1.21/14.2kg cylinder) price cut to LPG cylinders, in addition to an extension of the existing subsidy of Rs300/cylinder on the occasion of international women's day.

The price cut will be effective from 9 March, which reduces prices to Rs803/14.2kg cylinder in Delhi, from the previous level of Rs903/14.2kg cylinder, which has been in force since September 2023. This is in contrast to Indian state-controlled oil marketing companies increasing commercial LPG cylinder prices for March in line with rising import costs.

The subsidy scheme for poor women under the government's Pradhan Mantri Ujjwala Yojana (PMUY) for 12 refills has been extended until March 2025, which would cost Delhi a total of Rs120bn. The PMUY subsidy programme offers low-income and rural households access to LPG for use as a cleaner cooking fuel.

Under the existing subsidy scheme and discounted LPG prices, PMUY beneficiaries will now have to pay Rs503/14.2kg cylinder in Delhi.

The price of a 14.2kg LPG cylinder without the subsidy will now be Rs802.50 in Mumbai, in Kolkata Rs829 and in Chennai Rs818.50.

The upcoming general election in India in April-May has likely influenced the announcement of the subsidy extension, but oil marketing companies will bear the cost of the Rs100/cylinder cut in LPG prices.

Ruling and opposition parties had last year offered discounted LPG to poor women in five state elections, that brought prices of a 14.2kg cylinder down to Rs450-500, while the state of Uttar Pradesh offered a free cylinder to each PMUY beneficiary as a "Diwali gift".

The government also announced in September that it would provide 7.5mn LPG connections under the PMUY scheme until the April 2025-March 2026 fiscal year.

There were 102mn PMUY beneficiaries as of 1 March 2024 as against 96mn in 2023, government data show.

India's LPG refill rate for PMUY customers continues to remain weak at 3.87 refills during the 2023-24 fiscal year (up to January 2024), government documents show. Of 96mn PMUY beneficiaries, 11.8mn, or 12pc, did not buy LPG in 2022-23, the data show. This was largely the result of firming residential LPG prices since 2020.

By Rituparna Ghosh

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