Council on Energy, Environment and Water, a Delhi-based think tank, had conducted a survey in 2014-15 called ACCESS Survey.The Access to Clean Cooking Energy and Electricity – Survey of States (ACCESS) is India’s largest energy access survey.As per the survey, LPG’s cost was the foremost barrier to its adoption and continued use in rural poor households.
Has the Government Been Successful in Pushing the Use of LPG Cylinders
Since the start of the 21st century, successive governments have placed a premium on the cooking fuels in rural households transitioning to LPG.
2009
- In 2009, the Rajiv Gandhi Gramin LPG Vitrak Scheme was launched to increase LPG distribution in remote areas.
- Nearly 45 million new LPG connections were thus established between 2010 and 2013.
2015
- Direct Benefit Transfers (DBT) for LPG under the ‘PAHAL’ Scheme were initiated in 2015.
2016
- In 2016, direct home-refill deliveries were implemented and the ‘Give it Up’ program enrolled around 10 million LPG consumers to voluntarily discontinue subsidies and transfer their accounts to below-poverty-line households.
- The Pradhan Mantri Ujjwala Yojana (PMUY) followed, to install LPG connections in 80 million below-poverty-line households by 2020.
- The scheme also provides a subsidy of ₹200 for every 14.2-kg cylinder, which increased to ₹300 in October 2023.
- However, it is important to note that India, with around ₹300/liter, has one of the highest LPG prices in the world.
Drives India’s High LPG Prices
Dependency on Imports
- India relies heavily on imports for LPG, with more than 60% of its needs being met through imports.
- This import dependence contributes significantly to the pricing dynamics of LPG in the country.
- India’s LPG prices are influenced by the average Saudi Contract Prices (CP) for propane and butane.
- LPG is a mix of gasses, mainly consisting of butane and propane, with the percentage of butane limited.
- The CP is the international price for LPG trading, as set by Saudi Aramco.
- The average Saudi CP increased from USD 454 per tonne in FY20 to USD 710 in FY23, contributing to the hike in LPG prices.
- Analysts attribute this rise to improved demand from Asian markets, especially for petrochemicals, where propane serves as a crucial feedstock.
Import Dynamics
- India’s import of 8.7 million tonnes of LPG in April-September 2022 out of a total consumption of 13.8 million tonnes underscores its reliance on imported LPG.
- The pricing formula for LPG in India is dependent on global market trends, particularly in the Middle East, which is India’s largest LPG supplier.
Impact on Consumers
- The recent hike of Rs 50 per cylinder in March 2023 translates to a 4.75% increase in the price of a 14.2 kg domestic LPG cylinder in Delhi.
- Taxes and dealer commissions contribute to only 11% of the cylinder’s retail price, with almost 90% attributed to the cost of LPG itself, unlike petrol and diesel