According to Sources that taking advantage of low oil prices, government may give instruction to state oil marketing companies to increase price of subsidy LPG cylinder.
The oil marketing companies (OMCs) incurred gross under-recoveries of Rs 43,300 crore in 2019, of which LPG accounted for Rs 31,500 crore in same year. The price of subsidy cooking gas rise by Rs 10 per cylinder in the July-January period of current fiscal year. Due to the development in past few months, government is looking to completely eliminate oil subsidy by 2022. If this will happen then the , that the cooking gas price would increase by another Rs 100-150 per cylinder over the next one year.
As Sources said that taking advantage of low oil prices, government may give order to state-run oil marketing companies to increase price of subsidy LPG cylinder so that entire subsidy paid under direct benefit transfer scheme to eligible consumers is eliminated in one year’s time. By July 2019-January 2020, the Oil Marketing Company will increased the price of subsidized LPG by Rs 63 per cylinder. At current global oil prices, if oil companies raise the rate of subsidized LPG cylinder by just about Rs 10 per cylinder per month, in 15 months time there would not be any need to extend Central support.
The price of a subsidy LPG cylinder (14.2 kg) currently works to around Rs 557 with government providing Rs 157 as subsidy directly into the account of consumers. The subsidy level may fall if oil prices slides further and remains below $60 a barrel in most parts of 2021.
In latest report on oil and gas sector Motilal Oswal said “Raising prices of subsidized LPG cylinder augurs well for the OMCs, especially keeping in mind the intended privatization of BPCL. However, the resolve of the government would be tested if oil prices spike.”