To counter the impact of the rise in prices of essentials on household kitchens, the Centre on Tuesday slashed the domestic cooking gas cylinder refill price by Rs 200. The cost for the reduction will be absorbed by oil marketing companies (OMCs) with no additional burden on the exchequer, sources told FE.

Terming the price cut a gift from Prime Minister Narendra Modi amid Onam and Raksha Bandhan festivities, the government said the move will benefit more than 310 million domestic LPG consumers, including 96 million Pradhan Mantri Ujjwala Yojana (PMUY) beneficiary families.

A 14.2 kg cylinder in Delhi will now cost Rs 903 against Rs 1,103 so far. PMUY beneficiaries, who already receive a Rs 200 subsidy per cylinder for each refill, will get the refill at Rs 703/ cylinder.

“The decision will have no impact on the Budget,” a senior official told FE.

Spot LNG prices have ranged from $10 to $14 per metric million British thermal units (mmBtu) so far in 2023 from the average price of around $30/MMBtu in 2022, according to market observers.

In FY23, India imported 26.65 billion standard cubic meter equivalent of LNG, implying that the country met over 44% of its natural gas consumption through LNG, according to data from the Petroleum Planning and Analysis Cell.

“The reduction in cooking gas prices reflects the government’s commitment to prioritise the well-being of its citizens and ensure access to essential commodities at reasonable rates,” the Centre said in a statement.

With half a dozen states going to polls in November-December, the government had been worried in recent weeks over the spike in prices of daily essentials such as vegetables and pulses. This triggered a slew of measures on the supply side as well as the imposition of taxes on exports to improve local availability. General elections are also due in April-May next year.

To clear pending PMUY applications and to provide deposit-free LPG connections to all eligible households, the government will shortly start distributing PMUY connections to 7.5 million women from needy households who do not have an LPG connection. This will increase the total number of beneficiaries under PMUY from 96 million to 103.5 million.

The budgetary LPG subsidy, which was Rs 24,172 crore in FY20, was brought down to Rs 11,896 crore in FY21 as the government tried to limit subsidies to the needy and freight subsidies for far-flung regions. The subsidy rationalisation saw the budgetary outgo on LPG fall to just Rs 3,421 crore in FY22.

As the Centre gave a subsidy of Rs 200 per cylinder to PMUY beneficiaries, the budgetary outgo on this count rose to Rs 6,817 crore in FY23. The Centre gave a one-time grant of Rs 22,000 crore to state-run OMCs for domestic LPG under-recoveries in FY23 as the sharp price rise could not be passed on to consumers.