Cooking gas (LPG) subsidy has increased over 60 percent in last two months as the government maintains price line despite rising international rates, Indian Oil Corp (IOC) Chairman Sanjiv Singh told PTI.
All LPG consumers have to buy fuel at market price. The government, however, subsidizes 12 cylinders of 14.2-kg each per households in a year by providing the subsidy amount directly in bank accounts of users.
“Subsidy amount (transferred in bank accounts) was Rs. 159.29 per cylinder in May and it was raised to Rs. 204.95 in June and to Rs. 257.74 per cylinder this month,” he said.
The higher subsidy was meant to keep rates of subsidized LPG in check, Mr Singh added.
International rates of LPG, which was used as a benchmark for pricing of domestic fuel, have been on the run since June. Non-subsidised or market priced LPG price was Rs. 653.50 per 14.2-kg bottle in the national capital in May, which rose to Rs. 698.50 (Rs. 48 pr cylinder) in June.
This month price has further risen by Rs. 55.50 to Rs. 754 in Delhi.
Non-subsidised LPG is the one that consumers buy after exhausting their quota of below market rate fuel. It is also bought by those who have voluntarily given up subsidy and by commercial establishments.
“While LPG prices have shot up, subsidized LPG rates haven’t,” Mr Singh said, adding that only the minor tax part has been passed on to consumers.
As per tax rules, GST on LPG has to be calculated at the market rate of the fuel. The government may choose to subsidize a part of the price but tax will have to be paid at market rates.
This has meant that GST is calculated every month on the rate at which domestic non-subsidized LPG is priced. With rates on the rise, the tax has also risen, resulting in a minor increase in rates for subsidized users, he said.
Subsidised LPG was priced at Rs. 491.21 per cylinder in May, which rose to Rs. 493.55 in June and Rs. 496.26 this month, Mr Singh noted.
“The increase is mainly on account of GST on the revised price of Domestic Non-Subsidised LPG,” he said.
As a result of higher global rates, the price of non-subsidised LPG in Delhi will increase by Rs. 55.50 per cylinder.
“The balance Rs. 52.79 (Rs. 55.50 minus Rs. 2.71) is being compensated to the customer by an increase in subsidy transfer to their bank account. Accordingly, the subsidy transfer in the customer’s bank account has been increased to Rs. 257.74 per cylinder in July as against Rs. 204.95 per cylinder in June. Thus, the domestic LPG customer is protected against the increase in international prices of LPG,” he said.
Oil firms revise LPG price on 1st of every month based on average benchmark rate and foreign exchange rate in the previous month.