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  1. Modi government to put Rs 4 monthly LPG price hike on hold?

Modi government to put Rs 4 monthly LPG price hike on hold?

OMCs to continue raising price of kerosene to completely do away with subsidy

By: | New Delhi | Published: August 3, 2017 6:18 AM
Modi government, LPG price hike,  Lok Sabha, Dharmendra Pradhan, Petroleum minister, LPG cylinders, PDS kerosene, VAT According to a source close to the development, OMCs will continue the same course of action for LPG as was followed till now — increase or decrease the price depending on international prices. (Reuters)

Facing ire from opposition parties, the government is likely to put on hold its decision to authorise oil marketing companies (OMCs) to increase the effective price of liquefied petroleum gas (LPG) cylinders by Rs 4 per month in order to reduce and finally eliminate the subsidy burden. However, OMCs will continue to increase the price of kerosene by 25 paise per month to completely do away with the subsidy on the fuel. According to a source close to the development, OMCs will continue the same course of action for LPG as was followed till now — increase or decrease the price depending on international prices. “Though subsidy on LPG cannot go on for perpetuity and will have to stop at some point in time, right now it is difficult to say when it will be completely withdrawn,” said the source.

Petroleum minister Dharmendra Pradhan had on July 31 told the Lok Sabha in a written response that “the government vide its order dated 30th May, 2017 has again authorised OMCs to continue to increase the effective price of subsidised domestic LPG by Rs 4 per cylinder effective from 1st June, 2017 per month (excluding VAT as applicable in different states/Union territories) till the reduction of government subsidy to ‘nil’, or till March 2018, or till further order, whichever is earliest”. In a previous order with effect from July 1, 2016, OMCs were authorised to increase price of subsidised domestic cylinder by Rs 2 per month. OMCs on Tuesday increased prices of LPG cylinders by Rs 2 apiece.

By increasing the ‘effective’ price of LPG cylinders — price paid by consumers minus the subsidy credited to beneficiaries’ bank account — the government intended to bring down the fuel subsidy burden, which for the current financial year has been estimated to the tune of Rs 25,000 crore, of which the Centre has already paid Rs 16,000 crore. Of the total subsidy burden, around two-third is on account of LPG. The subsidy on PDS kerosene in Mumbai for August is Rs 7.02 per litre.

Following the reply in the Upper House, the entire opposition termed the move anti-poor, following which a person close to the development on Tuesday said that the subsidy is likely to continue for the poor. The government has distributed more than 2.5 crore LPG connections to women belonging to the below-the-poverty line category under the Pradhan Mantri Ujjwala Yojna and analysts fear that doing away with subsidy will further depress the rate of refill by this category of customers. At present, the rate of refills is 5.4 per year in rural areas.

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