Cooking gas prices to soar? LPG subsidy formula up for a major overhaul!

New Delhi (The Uttam Hindu): The entire subsidy structure for domestic LPG cylinders in the country could soon change. This is expected to have a direct impact on the common man's pocket. According to reports, state-owned oil companies have signed new contracts for LPG supplies with the United States, due to which the government is considering a change in the subsidy formula. If this change is implemented, cylinder prices may increase or subsidies may be reduced in the coming days.

What is the matter?

Last month, Indian Oil (IOCL), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) signed annual supply contracts with US exporters through 2026. This will import approximately 2.2 million metric tons per annum (MMTPA) of LPG. This represents about 10% of India's total annual LPG imports. This is the first time Indian companies have entered into long-term contracts with the US, rather than the spot market.

Why can the cylinder be expensive?

Currently, the subsidy is calculated based on the Saudi Contract Price (Saudi CP), which is the standard for supplies from West Asia. But oil companies are now demanding that the US Standard Price and logistics costs from across the Atlantic be added to the formula.

The catch is that the logistics cost of bringing gas from the US is nearly four times higher than from Saudi Arabia. This deal is only profitable for India if the price of US gas is low enough to offset the higher freight rates.

What will be the impact on the common man?

Experts believe that if a significant discount on US supplies isn't received, the government will either bear the burden of the increased costs itself or pass it on to consumers. If the government wants to continue providing gas at the current subsidy, the US discount is crucial. If this doesn't happen, the government may cut the subsidy. This means that gas cylinders will become more expensive for ordinary people and the millions of Ujjwala Yojana beneficiaries.

What are the prices and figures now?

The current price of a subsidized domestic LPG cylinder in Delhi is ₹853, with the last increase of ₹50 on April 8, 2025. Under the central government's Ujjwala Yojana, a subsidy of ₹300 is provided to beneficiaries, benefiting approximately 103.5 million people in the country until December 1, 2025. However, future prices remain a concern for the country's total 330 million LPG consumers. While the government is currently considering a new formula for determining prices, the possibility of inflation in the future cannot be completely ruled out due to rising logistics costs.