The Centre has reduced the number of subsidised LPG refills available annually under the Pradhan Mantri Ujjwala Yojana (PMUY) from nine to four, officials said during an inter-ministerial briefing on Monday (June 8). The government cited a sharp increase in global liquefied petroleum gas (LPG) prices amid the ongoing crisis in West Asia as the reason behind the move.
The move comes as state-run oil marketing companies (OMCs) face mounting losses on the sale of domestic cooking gas. According to the petroleum ministry, the effective cost of a domestic LPG cylinder has crossed Rs 1,600 based on international benchmark prices, while consumers continue to pay significantly lower rates.
Addressing the press, Praveen Khanooja, Additional Secretary in the Ministry of Petroleum and Natural Gas, said a subsidy of Rs 300 per cylinder for PMUY beneficiaries will be capped at four refills in a year.
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The ministry said the effective price for PMUY beneficiaries works out to Rs 642 per cylinder for the first four refills annually. This represents a discount of nearly 60% to the actual international cost of LPG. For non-PMUY consumers, the retail price of Rs 942 reflects a discount of around 45% to global benchmark prices.
Indirect subsidies continue to support all consumers
The government maintained that despite the recent Rs 29 increase in LPG prices, both Ujjwala and non-Ujjwala consumers continue to receive substantial support through indirect subsidies. According to the ministry, a non-Ujjwala consumer pays Rs 942 for a cylinder that would otherwise cost more than Rs 1,600 at prevailing international rates, translating into an implicit subsidy of around Rs 700 per cylinder.
For PMUY beneficiaries, the support is even higher. In addition to the lower retail price, eligible households receive a direct subsidy of Rs 300 per cylinder in their bank accounts for the first four refills, taking the total benefit to roughly Rs 1,000 per cylinder.
“Whether I’m a Ujjwala customer or a non-Ujjwala customer, I’m getting a cylinder which should have cost Rs 1,600 at Rs 942. That itself is an indirect subsidy. Over and above that, Ujjwala customers get Rs 300 more,” Khanooja said.
Rising international LPG prices
The government’s decision comes against the backdrop of a sharp rise in international LPG prices. Official data showed that the Saudi Contract Price (CP), a key benchmark for LPG imports into India, has surged significantly since the escalation of tensions in West Asia.
The Saudi CP for LPG stood at around $543 per tonne in February before the disruption. Following the closure of the Strait of Hormuz in late February, prices jumped sharply, with the April contract price rising to $775 per tonne.
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The benchmark has since increased further to about $790 per tonne in June. Expressed as the propane-butane blend typically used in India, international LPG prices have risen by nearly 46% since February.
Khanooja also noted that fuel retailers are currently incurring under-recoveries of around Rs 30 per litre on diesel and Rs 6 per litre on petrol, resulting in daily losses of Rs 600-700 crore.
The government said the direct LPG subsidy continues to benefit more than 10.58 crore PMUY connections across the country.
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