The government’s first budget is likely to signal the new administration’s intention of reforming India’s fuel pricing regime with monthly hikes of Rs. 10 per cylinder of cooking gas (LPG).
Each household will, however, continue to be entitled to 12 subsidised cylinders a year. Currently, a subsidised LPG cylinder costs Rs. 414 in Delhi while the market price — which consumers pay for any demand beyond the quota — is Rs. 905.
If implemented, the Rs. 10 monthly hike will slash Rs. 7,000 crore from India’s mounting fuel subsidy bill.
The government on Friday also pushed through a steep hike in railway passenger and freight fares in possibly the first instalment of the “tough measures” Prime Minister Narendra Modi had hinted at as necessary to revive the Indian economy.
The hike — 14.2% in all classes of passenger fares and 6.5% in freight charges — is effective June 25 and will also apply to tickets purchased in advance for journeys commencing on or after that date. The difference in fare for such advance tickets will be collected by ticket examiners during the journey.
Coming ahead of the full railway budget next month, the announcement was greeted with loud protests by leaders across the political spectrum, with some warning it would fuel inflation.
Fuel subsidies could exceed 1.40 lakh crore this year, following soaring crude oil prices due to the current crisis in Iraq.
The move is modeled on the 50 paise a litre monthly hike in diesel prices introduced in January 2013 and will incrementally move cooking gas prices towards market rates while sparing the consumer large shocks.
“With global crude oil prices touching a nine-month high of $115 a barrel, the government may be forced take some tough decisions ahead,” a senior official in the Prime Minister’s Office (PMO) told HT when asked about the LPG price hike proposal.
The proposal is based on recommendations made by the Petroleum Planning and Analysis Cell (PPAC)—the petroleum ministry’s technical and advisory wing—to the Union petroleum minister Dharmendra Pradhan recently.
In January this year, the UPA government had increased the number of subsidised LPG cylinders from nine to 12 a year per family, giving in to the growing demand of an inflation-hit public and political parties alike.
It had first capped the quota of subsidised cylinders to six a year for each family in September 2012 and raised it to nine a year later in January 2013.