Centre asks state-run oil companies to raise LPG prices by Rs 4 per cylinder, to do away with subsidies

The government has ordered state-run oil companies to raise the prices of subsidised cooking gas by Rs 4 per cylinder every month, Union Oil Minister Dharmendra Pradhan said on Monday, July 31. The move is an attempt to eliminate subsidies by March 2018.

However, it is not clear as to what the government plans to do when there is a sharp spike in global crude prices.

In July 2016, the government had asked Indian Oil, Bharat Petroleum and Hindustan Petroleum to raise rates of subsidised Liquefied Petroleum Gas by Rs 2 per cylinder, excluding Value Added Tax.

At present, the government gives the oil marketing companies bear a subsidy of a little above Rs 58 on a domestic subsidised LPG cylinder and around Rs 28.

"The government vide its order dated May 30, 2017, has again authorised PSU oil marketing companies to continue to increase the effective price of subsidised domestic LPG by Rs 4 per cylinder effective June 1, 2017, per month (excluding VAT) till the reduction of government subsidy to 'nil', or till March 2018, or till further orders, whichever is earliest," said Petroleum Minister, Dharmendra Pradhan in the Lok Sabha.

In the pre-GST period, LPG attracted a zero or nil excise duty all over the country. However, post-GST, a 5% tax was levied on subsidised LPG.

Oil companies have raised prices twice since the May 30 order. On July 1, LPG prices were increased by Rs 32 per cylinder. The hike was a six-year high. 

Currently, LPG cylinders are sold to households at market price. The government subsequently transfers Rs 86 per cylinder, the subsidy amount, through direct benefit transfer to beneficiaries' bank accounts.

• LPG Prices
• Cylinder prices rise
• Rs 4
• Subsidies cancelled