LPG Price Cut: Modi’s Rakhi ‘Gift’ Ends Up Drawing Attention to Inflation

As the Modi government rushes to salvage its flagship Ujjwala Yojana Scheme, Rs 200 is a small fraction of the price increase of the last three years. The government had slashed subsidy on LPG to one-sixth since 2018-19.

New Delhi: The Narendra Modi government’s decision to reduce liquefied petroleum gas of LPG cylinder prices by Rs 200, pegged as a “Rakhi gift” to the women of the country has drawn sharp criticism.

Opposition parties and analysts have accused the Bharatiya Janata Party (BJP) of attempting “a poll gimmick” ahead of key state elections later this year and the general elections in 2024.

Prior to the Rs 200 subsidy now being offered, the price of one cylinder was a whopping Rs 1,103 in New Delhi. 

With the Union government itself having told parliament in July that the price of subsidised LPG cylinder in January 2014 was Rs 414, the ‘cut’ is actually a small fraction of the price of this vital necessity that has risen sharply since 2014.

Gas: What government is saying

On Tuesday, Union minister for Information and Broadcasting Anurag Thakur announced the government’s decision, packaged as a “Rakhi gift”:

“On the auspicious occasion of Onam and Raksha Bandhan, prime minister Narendra Modi as he is known as ‘bhai’ Narendra Modi has given a gift to the millions and millions of sisters and users of LPG cylinders. The prices of the LPG cylinders for domestic use has been brought down by Rs 200 per cylinder for each and every user. At the same time 75 lakh new gas connections will be given under the Pradhan Mantri Ujjwala Yojana scheme that will take up the total connections to 10.35 crores in the coming days.”

Launched on May 1, 2016, the Pradhan Mantri Ujjwala Yojana or PMUY aimed to provide deposit-free LPG connections to adult women from poor households across the country.

“For the Pradhan Mantri Ujjwala Yojana beneficiaries they are already getting Rs 200 subsidy as DBT (Direct Benefit Transfer) with each refill but they will also benefit with the Rs 200 decrease. That means the rate reduction for the Pradhan Mantri Ujjwala Yojana beneficiaries will be Rs 200 plus Rs 200 subsidy making it Rs 400 per cylinder,” said Thakur.

Later on Tuesday, Modi in a statement on X (formerly Twitter) wrote that the move will “increase the comfort of the sisters in my family and make their lives easier.”

Thus with the new prices announced by the government, for Ujjwala beneficiaries the price for 14.2 kg cylinder will be Rs 703 which will include the continuing ‘Rs 200 per cylinder’ subsidy.

BJP claims on LPG prices under UPA and government data in parliament

However, in a bid to counter criticism of rising inflation and LPG cylinder prices, the BJP has claimed that with the new prices, the Modi government is providing LPG cylinders at half the price at which the UPA government did.

Several union ministers including Hardeep Singh Puri, Smriti Irani, Nirmala Sitharaman, and Dharmendra Pradhan and BJP chief ministers including Adityanath and Himanta Biswa Sarma lined up to hail the prime minister.

In a tweet Sarma  for instance, asked the Congress to “remain silent” and said that the price of a 14.2 kg LPG cylinder on January 1, 2014 was Rs 1,241. In comparison the same cylinder is priced at Rs 903 on August 29, 2023.

However, a look at the source of these prices, appears to be the Indian Oil Corporation Limited (IOCL) website which has listed the price Rs 1,241 on 1 January 2014 for a non-subsidised LPG cylinder.

Interestingly, previous prices of LPG cylinder year-wise for subsidised LPG cylinder is not available on the IOCL website. 

Sarma was also called out by Alt News.

Meanwhile the government itself in various replies in parliament has reiterated that the price of LPG cylinder in 2014 was Rs 414.

On July 31, Minister of State for petroleum and natural gases Rameswar Teli informed the Rajya Sabha in a written reply: “The price of subsidised domestic LPG cylinder in January 2014 was Rs. 414.”

In the same reply, Teli said: “The Retail Selling Price (RSP) of domestic LPG at Delhi is Rs. 1103 per 14.2 Kg cylinder whereas effective cost for PMUY beneficiaries is Rs. 903, as a subsidy of Rs. 200 per 14.2 Kg cylinder is admissible to PMUY beneficiaries.”

In another written reply in the Rajya Sabha on December 20, 2017 then minister for petroleum and natural gas Dharmendra Pradhan provided a list of subsidised and non-subsidised LPG cylinder prices since 2014, which also pegged the price of subsidised LPG cylinder in 2014 as Rs 414.

 According to Pradhan’s reply the prices were as follows: 

Year Subsidised Non-subsidised
2014 (April 1) Rs 414 Rs 980.50
2015 (April 1) Rs 417.82 Rs 621.00
2016 ( May 1) Rs 419.15 Rs 527.50
2017 (May 1) Rs 442.77 Rs 631

 In another written reply in the Rajya Sabha on February 13 20, 2019 Pradhan provided another list of subsidised and non-subsidised LPG cylinder prices.

The prices of non-subsidised LPG cylinder according to Pradhan’s reply were:

Year Subsidised Non-subsidised
2018 (April 1) Rs 491.35 Rs 653.50
2019 (January 1) Rs 494.99 Rs 689.00

In a written reply in the Rajya Sabha on March 18, 2020 Pradhan provided the subsidised price of LPG cylinder (14.2kg) for 2019 and 2020.

These were:

Year Subsidised Non-subsidised
2019 (April 1) Rs 538.95 Rs 706.50
2020 (March 1) Rs 574.50 Rs 805.50

*Non-subsidised prices in above table are from IOCL.com. 

On March 28, 2022 Teli in another written reply to Rajya Sabha gave the prices of domestic LPG cylinders from 2019 to 2022 but did not provide a breakup of subsidised and non-subsidised prices.

The prices provided by Teli for Delhi for 2021 and 2022 were:

Year LPG cylinder price (14.2 kg)
2021 (March 1) Rs 819
2022 (March 22) Rs 949.50

A look at the IOCL website reveals that the prices provided by Teli correspond to the non-subsidised prices of 14.2 kg cylinders.

Beyond gas

According to a reply in parliament this Monsoon Session, the government’s subsidy for domestic LPG connections has seen a sharp decrease from Rs 37,209 crore in 2018-19 to Rs 6,965 crore in FY23. This subsidy amount includes the expenditure on connections provided under Ujjwala Yojana.

After years of initial campaigning urging people to “give it [subsidy], up” the Modi government being forced to effectively offer a Rs 200 subsidy has put a spotlight on the scramble in the ruling party about their inability to control inflation. 

Food and fuel inflation are fast threatening to become the single-most important factor fuelling anti-incumbency. 

Citing a senior government official, Reuters reported how measures by a government in a panic to somehow alleviate price rise, “could cumulatively cost the government over $12 billion,”

Ahead of the 2019 general elections, the Ujjwala Yojana scheme was spun as the BJP’s answer to the UPA’s Mahatma Gandhi National Rural Employment Guarantee Scheme. Analysts wrote: “MGNREGS helped UPA come back to power in 2009 mirroring that narrative now being woven around Ujjwala Yojana by senior BJP leaders, led by PM Narendra Modi himself.”

The objective of the Modi government’s flagship scheme was “to make clean cooking fuel such as LPG available to the rural and deprived households which were otherwise using traditional cooking fuels such as firewood, coal, cow-dung cakes etc. Usage of traditional cooking fuels had detrimental impacts on the health of rural women as well as on the environment.”

Often referred to as the party of the rich, the BJP counted on the Ujjwala Yojana scheme to reshape its own and Modi’s profile.

Coming home to bite

However, this flagship scheme and the rising prices of LPG cylinders has emerged as a burning poll issue over the past two years.

Poll bound states like Rajasthan ruled by the opposition Congress are already providing LPG cylinders for Rs 500. The rising prices of the cylinders was a big factor in the run up to the Karnataka elections, where the Congress trounced the BJP, despite Modi’s personal attention and focussed campaign for weeks. 

The Congress has also promised to provide LPG cylinders at Rs 500 if voted to power in Madhya Pradesh.

The other states going to the polls later this year include Chhattisgarh and Telangana.

According to a report in The Hindu, the cost of preparing meals at home rose by 65% in five years, but wages by just 28%-37%.

“Food was becoming increasingly unaffordable, more families are eating unbalanced or unfulfilling meals,” it said.

LPG cylinders being unaffordable, from a ‘poll-winner’ are threatening to become a noose around the ruling party’s neck.

Opposition: “Modi acting out of fear of losing power”

Opposition parties have accused the BJP government of acting on the high LPG prices too late and pegged it as a move born out of electoral expediency. 

Taking aim at the Modi government’s “Rakhi gift”, Congress’ national spokesperson Gourav Vallabh said to The Wire: “There were 9 Rakhis before this, based on that there should be Rs 1800 cut. This is not a Rakhi gift, this is a kursi bachao cut.”

“What can be given for Rs 400 you have increased that by Rs 700 and given it for Rs 1100. And now you are saying Rs 200 cut. Is this a gift or torture to middle income families and women? This is not a gift, this is Modi’s fear of losing power.

“Modiji should take tuition from Ashok Gehlot. In Rajasthan 74 lakh BPL families are getting cylinders for Rs 500,” he said.

Speaking to The Wire, Sushmita Dev, TMC spokesperson said that the Modi government’s move is “too little too late.”

“This does not justify the kind of increment that the LPG gas cylinders saw over the last 4 and a half years. A gas cylinder impacts the common man’s household budget. At this stage to decrease it by Rs 200 is insensitive. In 2014 a gas cylinder was Rs 400 now it is anything between Rs 1100-1200. I think it is too little and too late.”

She added that while BJP did win the Gujarat elections, one of the reasons they lost Himachal Pradesh and Karnataka was because “price rise was a big issue.”

“There is no economic justification for this (price cut), nor have international gas prices changed. The only thing that has changed is that there are four state elections. The impetus for this is electoral mileage and nothing more.”

According to Sanjay Singh, Aam Aadmi Party MP, the move should not be seen as a relief to the common man.

“This is chunavi chaturaee (electoral astuteness). Whenever elections are around the corner, petrol and diesel prices are slashed, LPG prices are decreased and once elections are over, the prices are increased again. This should not be seen as a relief to consumers in any way. This is mere electoral astuteness,” he said to The Wire.

Singh also said that while issues like price rise and unemployment remain on the INDIA alliance’s agenda, with the third meeting underway in Mumbai, such moves cannot be used as diversionary tactics.

“Subsidised or non-subsidised the question is how much is the common man paying. You are writing off loans of over Rs 11 lakh crore for your billionaire friends and when it comes to the common man you make distinctions between subsidised and non subsidised. The question remains how much is the common man paying out of his pocket. And the fact is that in three years prices have increased by over Rs 500 for LPG cylinders.”

D Raja of the Communist Party of India (CPI) said to The Wire that the move is an “attempt to hoodwink people at the time of elections.”

“They looted the people by increasing the price of LPG cylinders as they liked now they have decreased by Rs 200. It is not only too late but also too little.”

BJP: Further price increase depends on global fuel prices

However, R.P. Singh, national spokesperson for the BJP said that the move has nothing to do with elections and is a bid to “take care of the poor.”

“This is to take care of the poor. This will benefit almost 11 crore beneficiaries of the Ujjwala Yojana scheme. What is wrong in taking care of the people and taking care of their health as this benefits women’s health,” he said to The Wire.

On being asked whether the price cut was too little, Singh said that the prices need to be compared with the UPA regime.

“The average price of the UPA regime was Rs 900 plus, last five years combined. Our average price is Rs 750 five years put together. Now the prices will be less than the UPA regime.”

Singh said that any further decrease in prices will depend on the international fuel prices.

The government has stated in parliament replies that India imports over 60% of its domestic LPG consumption.