Cooking gas price hikes might stop after March

However monthly hikes in kerosene likely, as Centre wants to deter its use in favour of cleaner fuel

The programme of a monthly rise in the price of government-subsidised kerosene is likely to continue beyond March (when this financial year ends). However, that in cooking gas (liquefied petroleum fuel or LPG) could be discontinued.

Prices of both the subsidised cooking fuels are being revised every month since June; sometimes, even thrice in the 30-day span.

Senior officials said the government wanted to discourage use of kerosene and promote LPG, a cleaner fuel. “To encourage use of LPG and win back the confidence of the middle class after demonetisation, the government might not continue with monthly increases in price,” said an official.

There has been a 11 per cent increase in the price of a subsidised LPG cylinder since May. The number of subsidised cylinders for each connection is limited to 12 in a year.

LPG constitutes the biggest chunk of the petroleum subsidy. The revenue loss on it was as high as Rs 76,285 crore in 2014-15. It fell 64 per cent next year to Rs 27,571 crore, primarily due to the big fall in global petro prices. The revenue loss on account of sale of kerosene was 54 per cent less in 2015-16, at Rs 11,496 crore.

The three government-owned oil marketing companies (OMCs) calculate their revenue loss, called underrecovery in industry parlance, based on the differential between the selling price and the global mark.

In diesel and petrol, after a programme of gradual hikes, the government decided to give up formal control on their pricing. In the case of LPG and kerosene, it quietly asked the OMCs to begin small price increases. Petrol and diesel prices were decontrolled in June 2010 and October 2014, respectively.

Kerosene is being sold at Rs 18.02 a litre in Mumbai. The subsidised price has been raised by 17 per cent since May. Kerosene has been raised since July. In September, there were three small price increases, of 21p, 25p and 26p a litre.

In 2014, the earlier government capped the number of subsidised LPG cylinders in a year at 12. This and prevention of diversion through direct transfer of the subsidy had helped in better targeting of the dole. Also, the present government is promoting the use of LPG through the Ujjwala scheme, under which Below Poverty Line households are given a connection free of cost. This is done if the household discontinues its kerosene consumption.

The Union government had also been, for about five years, reducing the kerosene quota for states on two criteria — LPG penetration and level of electrification. Earlier, the cut in quota was conservative at two to three per cent but is now more aggressive. Chandigarh and Delhi are becoming officially kerosene-free; Karnataka has committed to reduce its consumption. Since subsidised kerosene is sold only through the state public distribution systems, its price is notified by states. The other three fuels are dispensed through the network of state OMCs — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation. They have to notify the price themselves and convey it to their dealers. The three companies sell kerosene from their depots to state-appointed dealers at a Union government-determined price. At PDS outlets, the state government notification is followed.