At present, the delivery price of a cylinder in Delhi is around Rs 136. The new price of cooking gas will take immediate effect, official sources said. The government had initiated a phased programme for the dismantling of the administered pricing mechanism from April 1998 with a view to attract investment in the petroleum sector to meet the growing demand and to promote competition, efficiency and better customer service.

The programme envisages that subsidy on liquefied petroleum gas for domestic use sold by the state-run oil-marketing companies is to be reduced in phases throughsuitable adjustment in prices so that subsidy element equivalent to 15 per cent of import parity is transferred to the budget from 2002 onwards.

The subsidy on LPG (domestic) at present is estimated to be about Rs 24 per cylinder. Accordingly, in line with the programme for the dismantling of the APM, the government has decided to reduce the subsidy by Rs 24 per cylinder.

However, in an effort to reduce the burden on consumers, the Government has reviewed the cylinder compensation scheme for oil companies and has decided to reduce the subsidy by Rs 10 per cylinder. This amount will be adjusted against the proposed price increase. The consumer price of LPG (domestic) at ex-storage point is increased by Rs 14 per cylinder which will be exclusive of duty, sales tax and other local levies. Even after the above adjustment, the subsidy to the consumer is estimated to be Rs 60 per cylinder, the release said. The hike is perceived to be a fallout of the recommendations of the Nirmal Singh committee on oilreforms. The committee had suggested that import duty on LPG be retained at 10 per cent level at the onset of de-regulation on 2002.

The group had suggested a phase-in of about 5 years starting from April 1, 1998. This will include: