It's the season of soaring prices and another hike may soon be coming your way.
Taking a cue from monthly revisions in diesel price, the Centre is likely to go in for a monthly or quarterly increase in the price of domestic LPG cylinders.
The reason? A sharp devaluation of the rupee and rising global oil prices are expected to put an additional Rs. 30,000-crore-plus burden on the government's revenue kitty, impacting the fiscal and current account deficit, top official sources have told HT.
"The hike could be around Rs. 10 a month or Rs. 25 a quarter… but this is still at a discussion stage. A final decision on timing and quantum vests with the cabinet," said a government official.
The hike, if it comes through, will be the second part of a plan to curb subsidy on domestic LPG. The first was the imposition of a cap on cheap LPG whereby households get nine cylinders a year at subsidised rates and pay the market price for any additional refill.
"The Vijay Kelkar expert committee had recommended phased elimination of subsidy on domestic LPG over the next three years," the official said.
"This could be achieved by putting a cap on the number of subsidized cylinders given every year and also by a systematic increase in the price of domestic LPG cylinders."
According to the official, measures like the monthly 50-paise-per-litre hike in diesel prices and capping of subsidised LPG cylinders were expected to bring down fuel subsidies considerably this year. "The trend was satisfactory till May, but then the sharp fall in the rupee has led to losses on diesel climbing from Rs. 4 a litre to Rs. 11... the entire effect of the measures initiated has been nullified."
Hence the need for another round of hikes. Apart from LPG, a one-time increase of Rs. 2-3 a litre in diesel prices (above the monthly hike) is also being planned.
The fall in the rupee and the volatility in prices of oil and petroleum products in international markets have become a matter of grave concern for the government since global crude and petroleum product prices are quoted in US dollars.
The Indian currency was valued at Rs. 51 to a dollar in April but has since tumbled and even touched Rs. 65 in recent days. Every Re 1 depreciation of the rupee increases the under-recovery of public sector oil companies on retail sales of diesel, kerosene and subsidized domestic LPG by Rs. 8,000 crore a year.