After kerosene, government caps LPG subsidy at Rs 18 per kg

After kerosene, government caps LPG subsidy at Rs 18 per kgUnion Oil Minister Dharmendra Pradhan announced the government has capped subsidy payout domestic cooking gas, or LPG, at Rs 18 per kg.

The government had capped kerosene subsidy at Rs 12 per litre.

Kerosene through Public Distribution System (PDS) is sold at Rs 14.96 per litre against the actual cost of Rs 29.91 and this cost difference is termed as under-recovery or revenue loss.

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While the government will provide Rs 12 to meet most of this, the remaining Rs 2.95 will be borne by oil producers ONGC and Oil India Ltd, said Pradhan.

Likewise, there is an under-recovery or loss of Rs 167.18 on sale of every 14.2-kg subsidised LPG cylinder, which is sold at the current price of Rs 417.82.

“At present, the state-owned fuel retailers incur under-recoveries on sale of PDS kerosene and subsidised domestic LPG only as petrol and diesel have been deregulated (market-linked) with effect from June 2010 and October 2014 respectively,” said Pradhan.

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He added for 2015-16, the government has approved budgetary support for PDS kerosene under-recovery at a rate of Rs 12 per litre and the remaining under-recovery will be borne by the upstream companies.

Reportedly, for the first quarter of financial year 2016, the government will provide Rs 1,733 crore cash subsidy as per the new formula to Indian Oil Corp (IOC), Rs 404 crore to Bharat Petroleum Corp Ltd (BCPL) and Rs 451 crore to Hindustan Petroleum Corp Ltd (HPCL).

Twelve LPG cylinders of 14.2-kg are supplied to every household at a subsidised rate of Rs 417.82 and LPG consumers get subsidy equivalent to the under-recovery directly in their bank accounts so that they can purchase a 14.2-kg bottle at market price of Rs 585.

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(Image: Indiatimes)