Domestic LPG Prices Increased Again Amid Global Energy Challenges

Recent Price Hike of LPG Cylinders

The government has announced a price increase of Rs 29 for domestic LPG cylinders, marking the second hike in just three months. This adjustment is a response to the ongoing high global energy prices influenced by conflicts in the Gulf and Middle East regions. Starting June 7, the cost of a 14.2 kg LPG cylinder in Delhi will rise from Rs 913 to Rs 942.

The first price adjustment occurred on March 7, when the cost increased by Rs 60 per cylinder due to disruptions in global energy supplies caused by the West Asia conflict. Despite these increases, the government maintains that Indian households still pay significantly less for cooking gas compared to those in neighboring countries and advanced economies like the United States, Australia, and Canada.

For instance, beneficiaries of the Pradhan Mantri Ujjwala Yojana (PMUY) effectively pay Rs 642 for a 14.2 kg cylinder, while the general consumer in Delhi pays Rs 942, despite the actual supply cost exceeding Rs 1,600. According to government statistics, neighboring countries charge higher prices: Pakistan at approximately Rs 1,046, Nepal at Rs 1,207, and Bangladesh at Rs 1,225 for the same cylinder. In Sri Lanka, the price is around Rs 1,241.

In contrast, LPG prices in developed nations are considerably higher, with a 14.2 kg cylinder costing about Rs 1,755 in the United States, Rs 1,765 in Australia, and around Rs 2,411 in Canada. The government noted that the burden of rising international costs has largely been absorbed rather than passed on to consumers, with the government subsidizing several hundred rupees per cylinder.

Commercial LPG cylinders, used by hotels and businesses, are adjusted monthly based on international benchmarks, unlike domestic cylinders. India historically imports 60% of its LPG needs, with prices linked to the Saudi Contract Price (CP) set by Saudi Aramco at the beginning of each month. The Saudi CP for LPG was approximately US$543 per tonne in February, but following disruptions, it surged to US$775 per tonne in April and further increased to US$790 per tonne in June.

As a result, the cost of supplying a 14.2 kg cylinder, if priced according to import costs, has now exceeded Rs 1,600, leading to an under-recovery of about Rs 700 on each domestic cylinder.