OMCs to give three more subsidised LPG cylinders

The government today raised the cap on the supply of subsidised liquified petroleum gas (LPG) cylinders to nine per household from the previous six under political pressure.

The move to raise the cap on subsidised LPG cylinders came along with partial deregulation in diesel prices, which were last increased by Rs 5 in September last year.

The capping of cylinders to six in September was expected to bring down the revenue loss on account of LPG by about Rs 5,300 crore. But now, the raising of the cap by three would nullify the impact and push up subsidy by Rs 9,300 crore.

 

The cap of six cylinders met with widespread protests since only 44 per cent of population used six or less cylinders in a year.

Oil marketing companies — Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum —are incurring a daily revenue loss of Rs 389 crore in selling diesel, LPG and kerosene.

OMCs today raised LPG prices by Rs 46.50 on non-subsidised cylinders. The price of non-subsidised LPG was last revised in November 2012. OMCs were forced to roll back Rs 45-a-cylinder hike. They are selling these cylinders at Rs 895.50 each against Rs 410.50 for subsidised cylinders.

Consumers will get nine cylinders in a year from April 1, 2013.

Indian Oil chairman R S Butola had earlier said in an interview to Business Standard, “After capping, the use of domestic LPG cylinders has flattened, while growth in commercial LPG cylinders has gone up significantly.The principle of pricing a product at a market level will help, irrespective of whether subsidised LPG cylinders are capped at six or nine.

The sheer notion of either having market price or having a limited amount of subsidy puts resources at the most optimal use.”

     

PRICE POINTS
Recommendations of various committees on energy sector and fiscal consolidation

VIJAY KELKAR COMMITTEE 
(Report on fiscal consolidation, submitted in Sept 2012)

• Immediately raise the price of diesel by Rs4 a litre, kerosene by Rs2 a litre and LPG by Rs50 a cylinder
• Eliminate half of the diesel per unit subsidy this financial year and the remaining half over the next financial year
• Eliminate LPG subsidy by 2014-15, by reducing it 25% this year and the remaining 75 per cent in the next two financial years
• For kerosene, the objective should be to reduce the subsidy by one-third by 2014-15

KIRIT PARIKH COMMITTEE
(Report submitted in Feb 2010)

• Reduce effective protection by lowering the Customs duty on petrol and diesel to 7.5 per cent
• Restructure excise duties from the present mix of specific and ad-valorem to a pure specific levy and calibrating the levies at Rs5 a litre of diesel and Rs14.75 a litre of petrol
• Petrol and diesel prices should be market determined, both at the refinery gate and at the retail level
• An additional excise duty on diesel car owners
• Till UID and smartcards framework comes for distribution of PDS kerosene and domestic LPG, price of PDS kerosene needs to be increased by at least Rs6 a litre. Subsequently, it should be raised every year in step with the growth in per capital agricultural GDP at nominal price
• Raise domestic LPG prices by at least Rs100 a cylinder. Thereafter, the price of domestic LPG should be periodically revised based on increase in paying capacity as reflected in the rising per capita income

C RANGARAJAN COMMITTEE
(Report submitted in Feb 2006)

• Shift to a trade parity pricing formula for determining refinery gate as well as retail prices 
• Government to keep at arms length from price determination 
• Restrict subsidised kerosene to BPL families only
• Raise the price of domestic LPG by Rs75 a cylinder 
• Discontinue the practice of asking ONGC, GAIL, OIL to provide upstream assistance 
• Instead, collect their contributions by raising the OIDB cess from the present level of Rs1,800 a mt to Rs4,800 per mt 
• Government should meet the balance cost of subsidy from the Budget