Employee delivering LPG cylinders from HPCL. (Photographer: Dhiraj SIngh/Bloomberg)

Subsidised LPG Price Cut By Rs 1.46, Non-Subsidised By Rs 30 Per Cylinder

Domestic cooking gas price was cut by Rs 1.46 per cylinder, the third straight reduction in a month's time due to tax impact on reduced market rate of the fuel.

A 14.2-kilogram subsidised liquefied petroleum gas cylinder will now cost Rs 493.53 in the national capital from midnight of Thursday as against Rs 494.99 currently, Indian Oil Corporation Ltd., the country's largest fuel retailer, said in a statement.

This is the third straight reduction in LPG rate in a month’s time. On Dec. 1, subsidised LPG price was cut by Rs 6.52 per bottle and by Rs 5.91 on Jan. 1.

IOC said non-subsidised or market priced LPG rates have been cut by Rs 30 per cylinder due to a fall in price of LPG in international market and strengthening of the U.S. dollar-rupee exchange rate. It will now cost Rs 659 per 14.2-kg cylinder in Delhi. The reduction comes on the back of a steep Rs 120.50 cut on Jan. 1 and Rs 133 on Dec. 1.

All LPG consumers buy the fuel at market price. The government, however, subsidises 12 cylinders of 14.2-kg each per households in a year by providing the subsidy amount directly in bank accounts of users.

This subsidy amount varies from month to month, depending on the changes in the average international benchmark LPG rate and foreign exchange rate.

Also read: Subsidised LPG Price Cut By Rs 6.5 Per Cylinder

When international rates move up, the government provides a higher subsidy. And when they come down, subsidy is cut.

As per tax rules, GST on LPG has to be calculated at the market rate of the fuel. The government may choose to subsidise a part of the price but tax will have to be paid at market rates.

So, with the fall in market price or non-subsidised LPG price, the tax incidence on subsidised cooking fuel has also come down, leading to the current price reduction.

"Accordingly, the upfront cash payment by the consumer of domestic LPG will also reduce by Rs 30 per cylinder. Domestic LPG consumer will now be required to make upfront cash payment of Rs 659 a cylinder in place of Rs 689 per cylinder," IOC said.

Subsidised cooking gas consumers will get Rs 165.47 per cylinder subsidy in their bank accounts for the month of February, down from Rs 194.01 in January.