No more monthly hike of Rs. 4 in cylinder prices
Seventeen months after it asked oil companies to hike LPG cylinder prices by Rs. 4 monthly, the Center withdrew the decision in October. A source attributed it to the government giving out contrary signals with its free cooking gas scheme for the poor. In this period, price per cylinder went up by Rs. 76.5. However, rates have increased post October too. Find out more.
Government provides Rs. 251 as subsidy per cylinder
Every household qualifies for 12 subsidized 14.2kg LPG cylinders a year. Anything beyond that has to be purchased at market price. According to the Petroleum Planning and Analysis Cell, a subsidy of Rs. 251.31 is provided on every such cylinder. Roughly 18.11cr customers avail subsidized cylinders, including 3cr poor women who got free gas connection under the Ujjwala Yojana.
It then authorized firms to raise prices monthly
Initially, oil firms were authorized to increase price per 14.2kg cylinder price by Rs. 2 monthly, excluding VAT, from July'16 in order to remove subsidies. In May'17, the quantum of hike was doubled, allowing firms to increase prices by Rs. 4 from June'17 till subsidy becomes zero or March'18, whichever was earlier. Prices increased from Rs. 419.18 in June'16 to Rs. 495.69 in November'17.
What was the issue with the move?
Contrary to the hike scheme was the Pradhan Mantri Ujjwala Yojana, under which the government provides free connections to BPL households who don't already have a connection. They can also get EMIs for stove and refill. Rs. 8,000cr was allocated for the scheme for three years. Money saved on subsidies through the 'Give It Up' campaign was to be routed to the Ujjwala Yojana.
Meanwhile, the DBT scheme causing taxation problems
Prices have increased post October too, mainly due to Direct Benefit Transfer (DBT), wherein subsidies are transferred directly to bank accounts of customers, a source said. Earlier, VAT was levied on subsidized price. Now, cylinders are sold at market price; GST is levied on that higher rate. "Besides, market price fluctuates monthly, compelling changes in retail prices to account for the taxes," he explained.
