Winning Bizness Desk

Mumbai. The government has decided to limit the additional ₹300 subsidy under the Pradhan Mantri Ujjwala Yojana (PMUY) to only the first four LPG cylinders purchased in a year, reducing the benefit from the earlier nine cylinders. The move comes amid a sharp rise in international LPG prices triggered by geopolitical tensions in West Asia, significantly increasing the burden on public sector oil companies.

Additional Secretary in the Petroleum Ministry Praveen Khanuja said on Monday that the decision was necessitated by a steep rise in global LPG prices following the ongoing conflict involving the United States and Iran. Despite the reduction in subsidy coverage, Ujjwala beneficiaries will continue to receive the subsidy amount directly into their bank accounts through the Direct Benefit Transfer (DBT) mechanism. Following a ₹29 increase in domestic LPG prices on June 7, a standard 14.2-kg LPG cylinder now costs ₹942 in Delhi. With the subsidy benefit, Ujjwala consumers currently pay ₹642 per cylinder.

Rising global costs strain government finances

The ministry said the actual cost of supplying a domestic LPG cylinder has now crossed ₹1,600 due to soaring international prices. As a result, oil marketing companies are facing an under-recovery of nearly ₹700 on every cylinder sold. The total under-recovery on domestic LPG climbed to ₹60,000 crore by the end of the previous financial year, compared to ₹41,338 crore a year earlier.

To partly offset these losses, the Union Cabinet has approved compensation of ₹30,000 crore for oil companies. Officials clarified that the compensation package is separate from the subsidy provided directly to consumers. The government maintains that it is absorbing a substantial portion of the increased cost instead of passing the full burden on households.

Key numbers at a glance

• Additional ₹300 subsidy now applicable on only 4 cylinders annually, down from 9.
• Domestic LPG cylinder price in Delhi stands at ₹942.
• Effective Ujjwala cylinder price remains ₹642.
• Actual cost of a domestic LPG cylinder exceeds ₹1,600.
• Oil companies incur around ₹700 loss per cylinder.
• Total LPG under-recovery has risen to ₹60,000 crore.

Middle East crisis drives benchmark prices higher

India imports nearly 60% of its LPG requirement, with pricing linked to the Saudi Contract Price (CP) benchmark fixed monthly by Saudi Aramco. Following the closure of the Strait of Hormuz and escalating tensions in West Asia, LPG prices have surged dramatically in international markets.

The Saudi CP benchmark for LPG has jumped from about $543 per tonne in February to $790 per tonne in June, marking a rise of nearly 46%. During the same period, propane prices have increased by 39%, while butane prices have surged by 52%. Officials said these unprecedented increases have directly impacted the cost of supplying cooking gas in India.

Petrol and diesel losses add pressure

Apart from LPG, state-run oil companies are also facing significant losses on transport fuels. According to the ministry, companies are currently losing about ₹30 per litre on diesel and ₹6 per litre on petrol. This translates into a daily financial burden of roughly ₹600-700 crore.

Recent weeks have also seen increases in retail fuel prices. Petrol and diesel prices have risen by a combined ₹7.50 per litre since May, while CNG prices have gone up by nearly ₹6 per kilogram. Despite these hikes, officials insist that retail fuel prices remain below actual cost levels and that oil companies continue to absorb part of the increase.

India strengthens supply security measures

The government said India continues to provide one of the world's cheapest cooking gas supplies despite international volatility. Commercial LPG users, however, have seen much sharper increases. In Delhi, a 19-kg commercial LPG cylinder now costs ₹3,113.50 after multiple revisions linked to global benchmarks.

To avoid shortages, India has maintained petroleum shipments through the Strait of Hormuz despite regional disruptions. The country has also increased domestic LPG production by more than 60%, from around 32 TMT to 52 TMT, while diversifying imports through countries such as the United States, Canada and Algeria.

What the government has done

• Increased domestic LPG production by over 60%.
• Expanded imports beyond the Hormuz route.
• Prioritised supplies for households, hospitals and educational institutions.
• Encouraged consumers to shift to PNG where available.
• Raised OTP-based delivery verification to 90% to curb diversion and theft.

Officials said these measures have helped ensure uninterrupted availability of LPG and other petroleum products across the country despite one of the most volatile global energy environments in recent years.