LPG prices, which are revised on a monthly basis, went up again. The rate for unsubsidised, 14.2 kg cylinders has risen by a steep ₹144.50 in Delhi, at ₹858.50. In January 2020, a non-subsidised LPG cylinder cost ₹714 in Delhi. In three other metros too, LPG prices jumped — Kolkata: ₹896 (increase by ₹149); Mumbai: ₹829.50 (increase by ₹145); and Chennai: ₹881 (increase by ₹147). The recent price hike has been the sharpest since January 2014.
Domestic prices of liquefied petroleum gas (LPG) are based on a formula — the import parity price (IPP), which is based on international LPG prices. Saudi Aramco’s LPG price acts as the benchmark for the IPP and includes the free-on-board price, ocean freight, customs duties, port dues and the like.
This dollar-denominated figure is converted into rupees before local costs — such as local freight, bottling charges, marketing costs, margins for oil marketing firms and dealer commissions and the Goods and Services Tax — are added. This helps the government arrive at the retail selling price for LPG.
The government resets the LPG price every month, the decision being influenced by international prices and how the rupee has behaved against the dollar in the immediately preceding weeks.
For most of December, the Brent crude price had been on an uptrend, and had breached the $68 level late that month. It peaked at $68.91 in early January, but with the coronavirus (COVID-19) disease hogging headlines in recent weeks, fears of a global slowdown have pushed oil prices down through January, save for a few spikes.
Saudi Aramco had raised its propane prices to $565 per metric tonne in January, up sharply from $440 a metric tonne set for December. Aramco propane prices offer a benchmark for pricing the West Asia LPG sales to Asian markets.
The dollar-rupee dance has since been within the range of ₹71-₹72 to the dollar, having briefly breached the ₹72 mark in early January.
The price increase will affect retail consumers who have given up the subsidy.
The government has said that for those who avail subsidy, the increase would be mostly absorbed by the rise in subsidy.
The Centre said the price of an unsubsidised cylinder would increase from ₹714 to ₹858.50 in Delhi, for example, and that the subsidy offered would go up from ₹153.86 to ₹291.48.
Of the 27.76 crore retail consumers, 26.12 crore consumers avail LPG subsidy. Likewise, for Ujjwala consumers, the subsidy would go up from ₹174.86 to ₹312.48 per cylinder.