With no subsidy, cooking fuel burns a hole in consumers’ pocket

Source: Business Standard

Relevance: Price of LPG cylinders is increasing after the removal of subsidy.

Synopsis: Government’s cut on LPG subsidies will adversely affect nearly 290 million households with LPG connections.

What is the issue?

• Lack of global demand due to lockdowns had led to a crash in both prices of crude oil and petroleum products.
• Seizing the opportunity, the Central government phased out the LPG subsidy that successive governments had maintained.
• When international LPG prices began to rise in 2021, the oil-marketing companies also hiked the subsidised prices.
• The pressure was shifted onto the consumers who had to bear a Rs 140 increase in the price of a cylinder, irrespective of their income slab.
• This LPG subsidy disbursement was fine-tuned with the introduction of the direct benefit transfer program.
• It was further enhanced to voluntary removal of beneficiaries through the Give It Up program and finally the exclusion of those with a taxable income above Rs 10 lakh in 2016.
• The subsidy on LPG was done away with and what remained was some freight subsidy, which comes to Rs 20-30 a cylinder. This move of the government came after subsidies on diesel were phased out.
• This leaves more money in the hands of the government, which is tightening its purse. However, it adds to the woes of nearly 290 million households that have LPG connections but are battling high inflation, salary cuts, and job losses.