Govt. cites oil firm losses for latest LPG price hike, Pg13

Key Highlights:

• Domestic LPG cylinder prices increased by ₹29 on Sunday, marking a total hike of ₹89 since the West Asia conflict began three months ago.
• A 14.2-kg domestic LPG cylinder now costs ₹942 in Delhi.
• The government attributes the hike to Oil Marketing Companies (OMCs) absorbing under-recoveries estimated at ₹700 per cylinder.
• Domestic LPG is currently sold at approximately a 45% discount compared to international pricing.
• Beneficiaries of the Pradhan Mantri Ujjwala Yojana (PMUY) receive an even higher discount of about 60% on their first four cylinders.

Detailed Insights:

• This recent price adjustment is the second increase in domestic LPG prices since the onset of the West Asia conflict.
• The conflict has significantly impacted about 54% of India's total LPG demand, contributing to rising international costs.
• The government indicated that the cost of supplying a 14.2-kg cylinder would exceed ₹1,600 if aligned with the Saudi Contract Price in June.
• Experts suggest that the ₹29 per cylinder hike may not be sufficient to fully address the substantial ₹700 per cylinder under-recovery faced by OMCs.
• Prices for 19-kg commercial LPG cylinders and 5-kg Free Trade LPG (FTL) cylinders were not part of this specific hike.
• However, commercial LPG and FTL cylinders have seen cumulative increases of ₹1,345 and ₹323 respectively since the conflict began.

Key Concepts Involved:

• Under-recoveries: Losses incurred by Oil Marketing Companies (OMCs) when selling petroleum products below their cost of procurement and supply due to government-controlled prices.
• Oil Marketing Companies (OMCs): Public sector undertakings in India responsible for the refining, distribution, and marketing of petroleum products like LPG, petrol, and diesel.
• Pradhan Mantri Ujjwala Yojana (PMUY): A government scheme launched in 2016 to provide clean cooking fuel (LPG) connections to women from Below Poverty Line (BPL) households.
• Saudi Contract Price (CP): A benchmark price for LPG in the international market, published monthly by Saudi Aramco, which influences India's LPG import costs.