After quietly withdrawing the subsidy on LPG or cooking gas several years ago, the government has decided to reinstate the same at the rate of Rs 200 per cylinder.
The decision to restore the subsidy for some has been taken by the Union Cabinet, and will apply to all 33 crore LPG customers in the country.
The total financial implication will be around Rs 10,000 crore per year, and this year, it will cost Rs 7680 crore.
"The price of cooking gas cylinder has been brought down by Rs 200 for all consumers," information and broadcasting minister Anurag Thakur said, detailing the decisions of the Union Cabinet today.
Thakur refused to answer whether the subsidy would be sent via bank accounts or a flat discount will be given on the price of the cylinder.
In addition, he also said the government will also give another 75 lakh more Ujjwala gas connections to be given at zero cost.
The government had stopped sending LPG subsidy to consumers' bank account around 2-3 years ago, but never confirmed the move. Ujjwala consumers will get a total subsidy of Rs 400 per cylinder.
Asked how much it will cost the tax payer, Thakur said the numbers will be revealed by the relevant ministry.
The restoration move comes as the current administration at the center seeks to return to power in general elections to be held in around seven months.
As late as last month, it maintained that it was sending subsidies to consumers' bank accounts.
However, most consumers have complained that they have not been getting the subsidy amount for years now.
Last month, the government was asked the reason why LPG cyclinder prices are not being cut even though crude oil prices have come down considerably after hitting a peak of around $118 per barrel in May last year. For the past seven months, crude prices have been in the $60-$80 range.
In contrast, the price of one LPG cylinder in Chennai has been either static or rising for the past one year. For example, they were stable at Rs 1,068.50 until February, when they were increased to Rs 1,118.50, and have been at that level since.
"The subsidy, as admissible, is credited to the bank accounts of eligible beneficiaries," said Hardeep Singh Puri, minister of petroleum and natural gas, in the Rajya Sabha last month.
In Delhi, the price of one 14.2 kg cylinder for domestic use was at Rs 581 rupees in May 2020, and have since then climbed consistently to Rs 1,103 by March this year. There has been no price cut for LPG despite the sharp fall seen in the price of crude oil.
This is despite the fact that the oil marketing companies got Rs 22,000 crore of taxpayer money to compensate them for 'under-recoveries' made during the period of a spike in crude oil prices in 2022.
Puri said oil marketing companies were forced to increase the price of LPG cylinders as the price of Saudi propane -- the international benchmark price for LPG -- went from $415 in FY21 to $712 in FY23.
However, prices have not fallen in sync with international prices since then.
In June this year, for example, Saudi Aramco cut the price of propane to $450 per tonne. The current price of propane in Saudi for August delivery is $475. LPG prices, meanwhile have remained at their highest levels since March this year (see chart).