Among lowest in the world: Govt defends LPG price hike amid criticism
Hours after domestic LPG prices were raised by Rs 29 per cylinder, the Centre mounted a detailed defence of the increase, arguing that Indian households
Hours after domestic LPG prices were raised by Rs 29 per cylinder, the Centre mounted a detailed defence of the increase, arguing that Indian households continue to be protected from the full impact of a sharp rise in global energy prices triggered by the West Asia crisis. The government said the cost of supplying a 14.2-kg LPG cylinder has now crossed Rs 1,600, while a general consumer in Delhi will pay Rs 942 after the latest revision and a Pradhan Mantri Ujjwala Yojana beneficiary will effectively pay Rs 642 on eligible refills. Read Full Story "The Indian household continues to buy cooking gas much cheaper than the household in any neighbouring country, and far below the price paid in advanced economies such as the United States, Australia and Canada," the government said on June 7. The latest increase takes the price of a domestic LPG cylinder in Delhi from Rs 913 to Rs 942. It follows a Rs 60 increase announced on March 7, taking the cumulative rise over the past three months to Rs 89. GLOBAL PRICES HAVE SURGED, SAYS GOVERNMENT According to the Centre, the main reason behind the increase is the sharp rise in international LPG prices following disruptions in West Asia and the Strait of Hormuz. India imports around 60 per cent of its LPG requirement and domestic prices are linked to international benchmarks, particularly the Saudi Contract Price.
The government said the Saudi benchmark stood at about US$542.5 per tonne in February, before the crisis intensified. Following the disruption of shipping routes through the Strait of Hormuz, the benchmark rose to US$775 per tonne in April and further to US$790 per tonne in June. "The blended LPG benchmark has thus risen by about 46% since the pre-crisis February level," the statement said. According to the government, this increase has pushed the cost of supplying a domestic cylinder to more than Rs 1,600. 'CONSUMERS ARE NOT PAYING THE FULL COST' A key argument put forward by the Centre is that households are still paying substantially less than the actual cost of LPG. The government estimated that even after the latest increase, the under-recovery on every domestic cylinder remains about Rs 700. "What the household does not bear the brunt of is the several hundred rupees a cylinder which the Government is bearing," the statement said. "Through a period of sharp international cost increases, that burden has been absorbed upstream rather than passed to the consumer." The Centre also sought to distinguish between the subsidy paid to Ujjwala beneficiaries and the under-recovery borne by public sector oil companies. While Ujjwala beneficiaries continue to receive Rs 300 per cylinder on the first four refills every year, the government said all domestic consumers benefit from regulated pricing that keeps retail rates below market-linked costs. A Ujjwala beneficiary will continue to pay an effective Rs 642 per cylinder, while a non-beneficiary will pay Rs 942.
The BriefWire