Second straight LPG price reduction in December 2018

Business

31 Dec 2018

Good news! Subsidized LPG cylinder price slashed by Rs. 5.91

For the second time in a month, the price of subsidized domestic cooking gas or LPG has been reduced on account of tax impact on the reduced market rate of the fuel. Subsidized LPG price was slashed by Rs. 5.91/cylinder.

After the reduction, a 14.2-kg subsidized LPG cylinder will cost Rs. 494.99 in the national capital from midnight tonight; it currently costs Rs. 500.90.

Details

Second straight reduction in subsidized LPG price in December

Second straight reduction in subsidized LPG price in December

The LPG price reduction was announced by the country's largest fuel retailer, Indian Oil Corporation (IOC), in a statement. This is the second straight reduction in LPG rate in Dec'18.

Earlier, on 1 December, the subsidized LPG rate was decreased by Rs. 6.52 per cylinder after six consecutive rate hikes since June. The subsidized LPG price had increased by Rs. 14.13 during June-November.

Non-subsidized LPG

Non-subsidized LPG rate reduced by Rs. 120.5 per cylinder

Meanwhile, the non-subsidized LPG rate has been reduced by Rs. 120.50/cylinder; at market price, a 14.2-kg LPG cylinder will cost Rs. 689 after the reduction in Delhi. The market-priced LPG price was cut by Rs. 133 per cylinder on 1 December.

IOC said the prices were reduced "due to fall in price of LPG in international market and strengthening of US dollar-rupee exchange rate."

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Subsidy

All consumers have to buy LPG cylinders at market price

All consumers have to buy LPG cylinders at market price

While all consumers buy LPG cylinders at market price, the government annually subsidizes 12 cylinders per household, by directly depositing subsidy amount to consumer's linked bank account.

This subsidy amount varies depending on changes in average international benchmark LPG rate and foreign-exchange rate.

When global prices rise, the subsidy amount is hiked and vice versa. GST on LPG is, however, calculated at market rate.

LPG price

Tax incidence on subsidized LPG has decreased

With the decrease in LPG market price, the tax incidence on subsidized LPG has also decreased, leading to the current price reduction.

"Accordingly, the upfront cash payment by the consumer of domestic LPG will...reduce by Rs. 120.50 per cylinder. Domestic LPG consumer will now be required to make upfront cash payment of Rs. 689 a cylinder in place of Rs 809.50," IOC said.

How much subsidy will consumers get after LPG price reduction?

After the current price reduction, subsidized cooking gas consumers will receive a subsidy amount of Rs. 194.01 per cylinder in their bank accounts for January 2019. Earlier this month, the subsidy amount was reduced from Rs. 433.66 in November to Rs. 308.60 on 1 December.

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