The government announced on Sunday that oil marketing companies are still incurring an under-recovery of nearly Rs 700 on every domestic LPG cylinder, despite a Rs 29 increase in the price of cooking gas refills. This comes amid a global surge in energy prices following the West Asia conflict and the benchmark Saudi CP rising nearly 46% from $543 per tonne before the disruption to $775 per tonne in May. The Saudi CP has further increased to $790 per tonne in June, the government noted.
Current LPG Pricing
In India, the prices of petroleum products are linked to corresponding international benchmarks. The cost of supplying a domestic LPG cylinder has risen to more than Rs 1,600. A 14.2-kg domestic LPG cylinder in the capital now costs Rs 942, up from Rs 913. Beneficiaries of the Pradhan Mantri Ujjwala Yojana (PMUY) will pay an effective Rs 642 per cylinder after receiving a subsidy of Rs 300 per refill. However, PMUY beneficiaries will now receive the subsidy on only four refills a year, down from nine refills announced last year.
Price Adjustments
This is the second increase in domestic LPG prices since energy supplies were disrupted by the closure of the Strait of Hormuz due to the conflict, following a Rs 60-per-cylinder hike in March. Commercial LPG prices are deregulated and have been revised five times during this period. Oil retailers have also raised petrol, diesel, and CNG prices four times each to partly offset losses from higher global crude oil and gas prices.
- The price of a 19-kg commercial LPG cylinder, used by hotels and businesses, is revised automatically every month as a direct pass-through of international benchmark rates. It currently costs Rs 3,113.5 in the capital, or about Rs 164 per kg.
- A domestic consumer pays about Rs 66 per kg after the latest revision.
Government's Response
The government stated, "Through a period of sharp international cost increases, that burden has been absorbed upstream rather than passed on to the consumer." It added that under-recovery is separate from the subsidy, which is the gap between the international cost and the regulated retail price. This under-recovery is estimated at Rs 60,000 crore in FY26, up from Rs 41,338 crore in the previous year.
Despite 54% of India's LPG imports transiting through the Strait of Hormuz before the conflict, which remains disrupted, the government assured there is no shortage of any petroleum product. Refiners have also ramped up domestic LPG production by more than 60%, from 32,000 tonnes per day to 52,000 tonnes per day, to offset constrained imports.
