News Detail

The government is considering a proposal to raise cooking gas and kerosene prices in a staggered manner to cut the ballooning subsidy bill. Encouraged by the diesel experiment, the oil ministry is considering a hike in LPG cylinder prices by INR 5 to INR 10 per month and kerosene by about INR 1 a litre.

However, a hike of INR 5 every month can wipe out the under-recovery of INR 432.71 every cylinder in as many as seven years. Officials said the ministry felt the monthly increases could be as high as INR 10 if the political leadership agreed to take a stand.

“The Iraq crisis has posed a fresh challenge to the government and there may not be any other way out than increasing prices of fuels,” officials said. In kerosene, the entire subsidy of INR 32.87 per litre can be wiped out in two-and-a-half years if prices are raised by a rupee every month.

While a INR 10 hike in the price of an LPG cylinder could cut the subsidy bill by INR 7,000 crore per annum, the increase in kerosene prices would lower it by another INR 850 crore each year. However, officials said each household would continue to be entitled to 12 subsidised cylinders a year. At present, a subsidised LPG cylinder costs INR 416 in Calcutta, while a non- subsidised cylinder costs INR 946.

Fuel subsidy is the biggest drain on the exchequer. In the current fiscal, subsidy on diesel, LPG and kerosene is estimated at INR 115,548 crore. Of this, LPG alone accounts for INR 50,324 crore and kerosene INR 29,488 crore.

The UPA government had in January 2013 decided to raise diesel prices by 40-50 paise a litre every month till there is no under-recovery. The diesel under-recovery has fallen to INR 1.63 a litre at the end of the last fortnight.

Source-On Request