NEW DELHI: The Centre will pay Rs 22,000 crore as a one-time grant to state-run fuel retailers to compensate them for keeping price of LPG (liquefied petroleum gas) supplied as cooking fuel to households – in check in spite of a surge in the benchmark rates. The proposal was cleared by the Cabinet on Wednesday.
India imports LPG, mostly from Saudi Arabia, to meet about half of the demand. The Saudi contract price, the benchmark followed by the state-run fuel retailers, has risen 300% during this period but LPG refill rates have been raised by 72%, the government said. An LPG refill now costs Rs 1,053 in Delhi, Rs 1,052.50 in Mumbai, Rs 1,079 in Kolkata and Rs 1,068.50 in Chennai. The Centre had stopped subsidy on domestic LPG in June 2020, taking advantage of the oil price crash in the wake of the pandemic.
IndianOil, Bharat Petroleum, and Hindustan Petroleum – the three retailers that supply domestic LPG to households – had in the April-June quarter posted a combined loss of more than Rs 18,480 crore. While most of this loss accrued from a freeze on petrol and diesel price revision, under-recovery on LPG contributed a major chunk.
The compensation to retailers is akin to the equitable burden-sharing followed by the previous governments where a third of the retail losses were borne by oil producers by way of discounts to refiners, while the government gave subsidy to cover another third and the consumer shared the rest in small increase in prices.
In the current arrangement, the government has slapped windfall tax on oil and gas produced domestically and is using the mop-up to provide relief to the retailers.
India imports LPG, mostly from Saudi Arabia, to meet about half of the demand. The Saudi contract price, the benchmark followed by the state-run fuel retailers, has risen 300% during this period but LPG refill rates have been raised by 72%, the government said. An LPG refill now costs Rs 1,053 in Delhi, Rs 1,052.50 in Mumbai, Rs 1,079 in Kolkata and Rs 1,068.50 in Chennai. The Centre had stopped subsidy on domestic LPG in June 2020, taking advantage of the oil price crash in the wake of the pandemic.
IndianOil, Bharat Petroleum, and Hindustan Petroleum – the three retailers that supply domestic LPG to households – had in the April-June quarter posted a combined loss of more than Rs 18,480 crore. While most of this loss accrued from a freeze on petrol and diesel price revision, under-recovery on LPG contributed a major chunk.
The compensation to retailers is akin to the equitable burden-sharing followed by the previous governments where a third of the retail losses were borne by oil producers by way of discounts to refiners, while the government gave subsidy to cover another third and the consumer shared the rest in small increase in prices.
In the current arrangement, the government has slapped windfall tax on oil and gas produced domestically and is using the mop-up to provide relief to the retailers.
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