The government has raised the basic customs duty on domestic LPG imports to 15pc from 5pc, but has exempted household consumers from the hike, official documents show.
The duty hike will not be applicable to imports of liquefied propane, liquefied butane and mixture of liquefied propane and liquefied butane by state-controlled firms IOCL, HPCL and BPCL for supply to household domestic consumers, a central board of indirect taxes and customs notification said.
The hike, which came into effect on 1 July, will affect industrial LPG consumers such as textile and tile manufacturers that comprise only 2pc of India's overall LPG demand. Bulk LPG sales were at 34,900t in May, while the total number of residential LPG consumers were at 314mn households, and low-income consumers under the government's Pradhan Mantri Ujwala Yojana (PMUY) were at 95.9mn as of 1 June, government data show.
India's LPG consumption rose by 8pc on the year to 2.3mn t in May. May LPG demand rose on the back of increasing sales volumes at state-controlled oil marketing companies (OMCs) at 2.08mn t last month, up by 5.8pc on the year, and sales of commercial LPG at 224,100t, up by 38pc on the year.
The duty hike came despite state-controlled Saudi Aramco reducing its July propane Contract Price (CP) by $50/t to $400/t. The July butane CP was also set lower at $375/t, putting the propane-butane CP spread at $25/t.
The decline in CP prices has likely stemmed from a supply overhang which has persisted since May after lower domestic consumption in Saudi Arabia led to higher exports.
Decline in natural gas prices since the beginning of this year has already weakened demand for LPG by domestic tile manufacturers, as most companies have switched back to PNG from propane.
