Domestic LPG cheapest in India despite price hike, says Modi govt

AFTER the prices of domestic LPG (Liquefied Petroleum Gas) cylinders were hiked by ₹29, the petroleum and natural gas ministry said that Indian households still continue to enjoy the most affordable rates of the cooking gas.

The latest price hike of the 14.2 kg LPG cylinder — the second such increase since the West Asia conflict broke out — meant that the rates have increased by ₹89 cumulatively. With this, the price of domestic LPG stands at ₹942 per cylinder.

However, the Ministry of Petroleum and Natural Gas said that Indian households are still purchasing LPG cylinders at “much cheaper rates” when compared to neighbouring countries or even developed economies, including the US, Canada and Australia.

The ministry pressed that LPG prices are linked to international markets and that the Central government is continuing to modulate effective prices for the domestic consumer, despite fluctuations owing to the US-Iran war.

How cooking gas prices fare

“What the household does not bear the brunt of is the several hundred rupees a cylinder which the Government is bearing. Through a period of sharp international cost increases, that burden has been absorbed upstream rather than passed to the consumer,” a press release issued by the ministry stated.

It added that a beneficiary of the Pradhan Mantri Ujjwala Yojana (PMUY) pays an effective ₹642 for a 14.2 kg cylinder, and the general consumer in Delhi ₹942, against a cost to supply that has now risen to over ₹1,600.

The table below shows how LPG prices fare when compared to neigbouring countries and developed economies, according to data shared by the ministry. The final column shows how far the effective Ujjwala price of ₹642 a cylinder sits below the price in each market.

Market    Price per 14.2 kg cylinder (₹) Ujjwala consumer pays less by

India (Ujjwala, effective after revision)    642    —
Pakistan    1,046    about 39%
Nepal    1,207    about 47%
Bangladesh    approx. 1,225    about 48%
Sri Lanka    1,241    about 48%
United States    approx. 1,755    about 63%
Australia    approx. 1,765    about 64%
Canada    approx. 2,411    about 73%

The ministry reiterated that a PMUY beneficiary will additionally receive the direct benefit transfer of ₹300 a cylinder on the first four refills each year and so pays an effective ₹642 on those refills. “Even a non-PMUY household would pay about ₹700 below the market-linked cost of the cylinder,” it added.

How LPG is priced:

The commercial cylinder used by hotels and businesses is revised automatically every month, because its price is a direct pass-through of the international benchmark.

The domestic cooking cylinder is not. India used to import 60% of its LPG requirements, and the landed cost of that import tracks the Saudi Contract Price (CP) that Saudi Aramco sets at the start of each month. This is an external price over which the Indian consumer has no control.

Expressed as the 50:50 propane-butane blend used for India’s LPG, the Saudi CP for LPG stood at about $543 a tonne in February, before the disruption. Following the closure of the Strait of Hormuz in late February, the April contract price rose to $775 a tonne, and has since edged up further to $790 a tonne in June.

The blended LPG benchmark has thus risen by about 46% since the pre-crisis February level.

Following the June contract price, the cost of supplying a 14.2 kg cylinder, were it priced on an import-linked basis, has risen to over ₹1,600. The under-recovery now absorbed on each domestic cylinder is about ₹700, the ministry said.

The scale of this is visible in the fully market-priced commercial cylinder: the 19 kg cylinder used by hotels and restaurants sells in Delhi at ₹3,113.50, about ₹164 a kg, after five increases during the West Asia crisis. The domestic household, by contrast, pays about ₹66 a kg after the revision.