LPG price cut to cost government additional Rs 4,000 crore in FY24

The financial implication of the government's decision to reduce the price of cooking gas cylinders by Rs 200 for all subscribers will come to around an additional Rs 4,000 crore for the financial year 2023-24 (FY24), according to a report by Reuters. This is in addition to over Rs 7,600 crore the government has budgeted for the current financial year.

After a Union Cabinet meeting, information and broadcasting minister Anurag Thakur said that under the Ujjwala scheme, people already get a subsidy of Rs 200 on cooking gas cylinders, while the reduction of Rs 200 in prices of liquefied petroleum gas (LPG cylinders) announced on August 29 will be in addition to that.

The minister said that the subsidy on LPG cylinders will come into effect immediately as a Raksha Bandhan and Onam gift.

The decision came months before the Assembly polls are scheduled to take place in four states.

First change in LPG price in six months

The reduction in the LPG cylinder price will come into effect from August 29. This will be the first change in the price of the LPG cylinder in six months. The price of 14.2 kg domestic LPG cylinders was raised by Rs 50 in March. Before this, the price of LPG cylinders was hiked back in July 2022.

"This is a gift to crores of my sisters of the country on the occasion of Raksha Bandhan. Our government will always do everything possible that improves people's quality of life and benefits the poor and middle class," Prime Minister Narendra Modi wrote on X.

India's annual retail inflation touched a 15-month high of 7.44 per cent in July and food price inflation reached 11.5 per cent. According to government data, India has a total of 314 million domestic LPG consumers.

The price of a 14-kg LPG cylinder is around Rs 1,103 in New Delhi. Currently, a 14-kg LPG cylinder costs Rs 1,102.5 in Mumbai, Rs 1,118.5 in Chennai, and Rs 1,129 in Kolkata.

Attempt to tame inflation

Last week, Finance Minister Nirmala Sitharaman stated that the Centre's priority is to tame inflation to ensure sustained economic growth.

The latest domestic LPG cylinder price cut will be in addition to the existing subsidy of Rs 200 per cylinder to Pradhan Mantri Ujjwala Yojana (PMUY) households.

As a result of the decision, the cost of a 14.2 kg cylinder in Delhi will come down to Rs 903 per cylinder. PMUY households will receive it for Rs 703 per cylinder.

In May 2022, the Centre had announced a targeted subsidy of Rs 200 per cooking gas (14.2 kg) cylinder for 90 million PMUY beneficiaries for up to 12 refills for 2022-23. In March, the subsidy was extended by a year at a total cost of Rs 7,680 crore.

India imports about 60 per cent of its liquefied petroleum gas requirement, and LPG prices globally have surged 303 per cent since April 2020.