The Union Cabinet’s decision to reduce the price of domestic LPG cylinders by Rs 200 ahead of election season has been termed as a “Raksha Bandhan gift” by Prime Minister Narendra Modi. However, the “gift” is likely to prove extra costly for the public sector oil marketing companies (OMCs), which already suffer huge losses on the sale of domestic LPG.
According to the Ministry of Petroleum and Natural Gas, India imports more than 60 per cent of its domestic LPG requirement and the government continues to modulate the effective consumer price of domestic LPG. Under the Direct Benefit Transfer for LPG (DBTL) scheme, subsidy is deposited in the bank accounts of eligible beneficiaries. The Ministry, in its data presented to the Rajya Sabha last month, admitted that OMCs have suffered huge losses on the sale of domestic LPG.
During the period 2020-21 to 2022-23, the average Saudi CP (the international benchmark for LPG pricing) went up from $415 per MT to $712 per MT. According to the government, the increase in international prices was not fully passed on to Indian citizens, due to which the OMCs suffered under-recoveries of approximately Rs 28,000 crore on the sale of domestic LPG. The government approved a one-time compensation of Rs 22,000 crore to OMCs in FY 2022-23.
The funds allocated for the DBTL scheme (budget estimates) for 2023-24 are the same as in 2022-23 (revised estimates) at Rs 180 crore. The government reviews its budgetary requirements during the course of the year, based on emerging situations and expenditure. The allocation for Pradhan Mantri Ujjwala Yojana (PMUY) for 2022-23 at the budget estimates stage was Rs 800 crore, which was revised to Rs 8,010 crore at the revised estimates stage.
Contours of Ujjwala scheme
PMUY was launched on May 1, 2016, to provide deposit-free LPG connections to adult women members of poor households across the country. The target of eight crore connections was achieved in September 2019. To cover the remaining poor households, PMUY phase-2 (Ujjwala 2.0) was launched in August 2021 with a target of one crore additional PMUY connections, which was achieved in January 2022.
Subsequently, the Government decided to release 60 lakh more LPG connections under Ujjwala 2.0 and, as of January 1, 2023, the target of 1.6 crore Ujjwala 2.0 connections has been achieved. Under Ujjwala 2.0, a special provision was made for migrant families, which can use a self-declaration, instead of a proof of address and ration card, to apply for a PMUY connection. A total of 5.43 lakh LPG connections have been provided to migrant households under Ujjwala 2.0.
LPG consumption
Per capita consumption of 14.2 kg cylinders by PMUY beneficiaries has increased from 3.01 (FY 2019-20) to 3.71 (FY 2022-23). As of July 1, 2023, there are about 9.59 crore PMUY beneficiaries, of whom 8.41 crore have taken at least one refill during 2022-23.
India’s LPG consumption has increased from 19,623 TMT in 2015-16 to 28,503 TMT in 2022-23. LPG coverage in the country has gone up from 62 per cent in 2016 to almost 100 per cent, and the number of active LPG domestic connections has more than doubled from 14.52 crore on April 1, 2014, to 31.5 crore in July 2023. While at the national level the LPG coverage is near-saturation, there are a few pockets in the country where it is additionally required, according to the Ministry.