The government has withdrawn its decision to raise LPG prices by Rs 4 per cylinder every month as the move was seen contrary to its Ujjwala scheme of providing free cooking gas connections to the poor.
The government had previously ordered public sector oil marketing companies to raise domestic cooking gas (LPG) prices by Rs 4 per cylinder every month beginning June 2016 with a view to eliminating subsidies.
The order was, however, withdrawn in October, a top source said.
Subsequently, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have not raised LPG prices from October.
Previously, the oil firms were authorised to increase price of subsidised domestic LPG cylinder by Rs 2 per 14.2-kg cylinder per month (excluding VAT) with effect from July 1, 2016. Oil companies had hiked LPG rates on 10 occasions since that go-ahead.
Every household is entitled to 12 cylinders of 14.2-kg each at subsidised rates in a year. Any requirement beyond that is to be purchased at market price.
The quantum of hike was doubled through an order dated May 30, 2017. That order authorised the state-owned firms to continue to increase the effective price of subsidised domestic LPG by Rs 4 per cylinder effective June 1, 2017, per month (excluding VAT) till the reduction of government subsidy to ‘nil’ or March 2018 or further orders, whichever is earlier.
The source said it was felt that raising prices was giving a contrary signal to users. On the one hand, the government was pushing for giving free cooking gas connections to the poor, but on the other, it was raising prices every month.
To correct this, the order was withdrawn, he said.
He also said there have been increase in price of subsidised LPG even after October mainly because of taxation issues.
The taxation issue arose after implementation of the direct benefit transfer (DBT) scheme in which consumers are paid subsidy amount directly in their bank accounts, which is supposed to be used to buy market-priced LPG.