Datanomics: After deflation of 18 months, LPG may see retail inflation now

The retail price deflation in LPG (excl conveyance) was as high as over 24 per cent for each of the first five months of 2024-25

The liquefied petroleum gas (LPG) is set to witness retail price inflation beginning April after a continuous fall in prices year-on-year for one and a half years till February, 2025.

 

However, its effect on overall inflation would be minimal as LPG (excluding conveyance) has just 1.29 per cent weight in the consumer price index (base 2012).

 

The government jacked up the price of a domestic LPG cylinder by ₹50 this week. Its impact on overall retail inflation may vary in the range of 0.07-0.12 per cent in four metros -- Delhi, Kolkata, Chennai and Mumbai.

 

Since the retail prices of commercial LPG cylinders (19 kg) are more closely linked with market rates and are inching down, those would offset this hike in the inflation rate to some extent.

 

The retail price deflation in LPG (excluding conveyance) was as high as over 24 per cent for each of the first five months of financial year 2024-25 (FY25).

 

After that, it moderated but remained in double digits for each of the next three months. For the last three months, it came down below 10 per cent but was still over nine per cent.

 

Before the price rise, the average price of an LPG cylinder for domestic use (14.2 kg) stood at ₹ 813.25 in four metros for at least a year. Adding ₹50 on that would give retail price inflation of 6.15 per cent in these four metros year-on-year.

 

This inflation may continue for one year, assuming no further changes are made by the government.

 

The overall impact at all-India level will be slightly modified, depending on prices in other parts of the country.

 

Price hike in subsidised cylinder (Ujwalla) would have a bit more impact. Average price of this cylinder stood at ₹513.25 in four metros. ₹50 hike would give the inflation rate of 9.74 per cent.