Prices of Commercial LPG, Domestic Natural Gas, Jet Fuel Up; Bound To Raise Inflation and Hit Consumers

In August, the Modi government tried to project a small snip in domestic LPG cylinder prices as a ‘Rakhi gift.’ Fuel price hikes feed the inflation chain and heighten all-round hardship.

New Delhi: Public sector oil and gas company Indian Oil Corporation Limited has hiked the prices of commercial LPG or Liquified Petroleum Gas. The price has been increased by Rs 209 per cylinder, with the new prices coming into effect on Sunday, October 1.

There has been no change yet in the price of domestic LPG. The government reduced the price of domestic LPG by Rs 200 on August 29, projecting it as a ‘Rakhi gift’ – but the move instead drew attention to how high the price of domestic LPG was and how the Rs 200 cut was a small fraction of the increase since 2014.

The retail price of 19 kg commercial LPG cylinders in Delhi will now be Rs 1731.50, as per Moneycontrol. The Hindu reports that in Chennai, the new price is Rs 1,898/cylinder. It was Rs 1,685 per cylinder in September.

LPG is used for cooking, as motor fuel, and for heating as well as cooling (refrigeration) purposes and in certain industries.

This is bound to impact inflation rates as the increased cost is shifted to consumers and if connected with items of necessary consumption, it hurts the pockets of all citizens.

There has been a persistent complaint that during the Modi government’s tenure, even though international crude prices have been low, the fuel prices were still high for consumers – with excise duties and cess helping the revenues of the government (mostly the Centre). Now, citing rising international prices, the price rise is still passed on to citizens.

Domestic natural gas prices also up

The price of domestic natural gas has also been raised by the Union government. From $8.60 per metric million British thermal unit (mmBtu), it will now go up to $9.20 per mmBtu, according to a notification issued by the Ministry of Petroleum and Natural Gas.

This has happened for the second month in a row. In September, the per mmBtu price was increased from $7.85 to $8.60.

Earlier, the prices of the four big gas trading hubs of the world – Henry Hub, Albany, National Balancing Point (UK) and Russian gas used to decide what the domestic gas price would be. This was fixed for six months in one go. As per the new formula adopted by the government, cited by Hindustan Times, the price of domestic natural gas is now decided on the basis of the price of the Indian crude basket every month. 

Jet fuel up too

The price of jet fuel or Aviation Turbine Fuel (ATF) was also hiked by 5%. ATF, for domestic airlines, has been “hiked by 5% to highest this year, and may push up airfares in the festive season”, reports Indian Express.

International prices have been going up and this is “the fourth straight monthly increase since July.”

LPG blues

The Modi government’s Ujjwala scheme, centred around affordable LPG for women, was meant to enable a transition from smoke-fired chullahs as well as make it possible for women to cook at affordable prices. But jittery after the comprehensive electoral loss in Karnataka, in some part due to anger over rising LPG prices, as reported by The Wire earlier, the Union government rushed “to salvage its flagship Ujjwala Yojana Scheme”, by reducing prices. The Rs 200 reduction, critics pointed out, was a small fraction of the price increase over the past three years. 

Moreover, the Union government slashed subsidies on LPG to one-sixth since 2018-19.

Across the board, the revised fuel price rises kicked into effect on Sunday, when inflation has been consistently well above the RBI’s acceptable bandwidth of 2-6%, greatly adding to difficulties faced by the majority of people. Selwin, an autorickshaw driver, told The Hindu that the hike was “uncalled for” amidst rising prices of essential commodities. “We are unable to make ends meet. Already CNG and petrol prices are quite high making LPG a better alternative due to its pricing. But if prices keep increasing then it will no longer be viable to be in the business,” he said.