With the gradual easing of the Covid-19 situation across the country, and when Saudi Aramco increased LPG prices per metric tonne to $ 870 for propane and $ 830 for butane in November, from $ 800 and 795 $, respectively, in October, in order to control the surge in the price of the main cooking fuel, the Modi government could reinstate the LPG subsidy from next month.
Even though the Modi government stopped the LPG subsidy from July 2020, due to a sharp drop in international benchmark prices for LPG (Saudi Aramco), international prices had nevertheless started to increase since November 2020. But a massive hike has taken place. in the current year (2021).
Increase the gas?
Since Indian LPG is a 60:40 mixture of butane and propane, the price volatility of both fuels is impacting LPG prices in the country.
July 2020: This is the month in which the subsidy under the DBTL scheme was stopped. The reason is the collapse of international benchmark prices. LPG prices for propane and butane per metric ton at the start of 2020 were $ 565 and $ 590 respectively. But prices dropped to $ 360 and $ 340, respectively, in July 2020.
This reference price rate was in effect in July 2019.
However, prices moved north from the start of this year. And in the last 10 months (January-October 2021), international prices have increased by more than 122% for propane and more than 133% for butane.
As a result, the 14.2 kg LPG cylinder now costs Rs 926 in Bhubaneswar; while the cost in July 2020 was Rs 621. Over the past 16 months (August 2020-November 2021), the price of the 14.2 kg bottle has increased by 49%. Odisha has around 89 lakh consumers.
According to the recently released SBI research report, the sharp increase in LPG prices and the cancellation of the subsidy saw a sharp drop in the recharge rate among PMUY beneficiaries. The negative impact has been, according to the report, that the prices of firewood, dung cake and other traditional cooking fuels have increased over the past 10 months.
Significantly, PM Ujjwala Yojana was started to get rid of conventional smoke-inducing cooking fuels.
According to data from the Union Ministry of Petroleum, of the eight crore beneficiaries of PMUY, around 4.8 crore of consumers filled their LPG cylinders at least once during the first quarter of fiscal year 2021-22 against 7.91 in 2020-21.
In the given context, PM Modi launched UP’s Ujjwala Yojana 2.0 related to the poll. In accordance with the 2021-22 budget, 1 cr of additional LPG connections will be granted to the poorest sections of the country.
In addition, in the same budget document, the allocation for the LPG subsidy for the year 2021-22 was set at Rs 14,073 cr against an expenditure of Rs 36,178 cr in 2020-21. The increase in the LPG subsidy has been attributed to a sharp increase in connections under PMUY. And this gas arithmetic drops a big clue.
Since the grant amount allocated to the LPG grant has been reduced by more than half, it is highly likely that the Center will reduce the annual income eligibility limit for the LPG grant to Rs 5 lakh from Rs 10 lakh (including spouse’s income).
According to an assessment, the Modi government will restore the full subsidy to PMUY beneficiaries, but for non-PMUY consumers (around 20 crore), an income cap of Rs 5 lakh will be considered eligible for the subsidy, which means that a household with a monthly income of (including spouse’s income) Rs 41,000 will now be eligible for the LPG subsidy.