LPG price hike: Why did it soar by ₹100 in a fortnight?

The steep hike in liquefied petroleum gas (LPG) price comes at a time when the pandemic-hit country tries to pull the economy out of a recession. This is the steepest ever monthly hike – in span of a fortnight, an increase of Rs 100. Rising energy prices will stoke inflation in India, and the consumers will have to burn their pocket. Any rise or fall in the cost of LPG cylinder affects the budget of a family. Almost all the household in India has an LPG connection and it is mainly used for cooking purpose.

How is LPG price determined in India?

LPG price in India is determined by the state-run oil companies and is revised on a monthly basis. Domestic prices of the LPG are based on import parity price (IPP), which is based on international LPG prices. Saudi Aramco’s LPG price acts as the benchmark for the IPP. The government resets the LPG price every month, the decision being influenced by international prices and the US dollar and rupee exchange rate.

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What is Import parity price or IPP?

Import parity price is the price at the border of a good that is imported. It includes international transport costs and tariffs.

LPG cylinder price rates in 4 metros

After the latest hike, the price of a 14.2 kg LPG cylinder for domestic use increased by ₹50. According to Indian Oil Corporation, a non-subsidised 14.2 kg gas cylinder in Delhi and Mumbai will now cost ₹694, while it will be ₹720.50 in Kolkata, and ₹710 in Chennai. Before the hike, the same cost ₹594 in Delhi, ₹620.50 in Kolkata, ₹594 in Mumbai and ₹610 in Chennai. These rates are effective from 15 December.

The government gives 12 LPG cylinders of 14.2-kg each to households in a year at a subsidised rate. This subsidy is directly paid into the bank accounts of the users.