India has increased prices of non-subsidised LPG, a cooking fuel, by 3pc in July from a month earlier after keeping them stable for a period of three months that coincided with key state polls and the world's worst outbreak of Covid-19 in the country.
Indian state-controlled refiners, which run the domestic LPG industry, have raised prices to 834.50 rupees ($11.30) for a 14.2kg LPG cylinder in Delhi for July from Rs809 in June, according to state-controlled IOC, citing higher international crude prices. Prices were last changed in April to Rs809 from Rs819 in March. LPG prices have increased by Rs141, or 20pc, so far this year even as Covid-19 shrank economic activity and left tens of millions jobless. The price of a 19kg cylinder, used by businesses, has risen by Rs76 from June to Rs1,550 in July.
IOC has also increased auto LPG rates to Rs52.08/l this month from Rs49.51/l in June. Gasoline prices in Delhi are at Rs98.81/l, with federal and state taxes making up 56pc, and diesel is retailing at Rs89.18/l, with taxes making up 50pc of the price.
LPG demand rose to 2.24mn t in June from 2.1mn t in May and 2.04mn t a year earlier, according to IOC. By comparison, consumption totalled 1.78mn t in pre-pandemic June 2019. The pandemic has increased demand for the cooking fuel as more people stayed at home during lockdowns. Lockdowns in May-June also led to higher use of the fuel. But frequent rate hikes may hurt fuel consumption once the lockdowns are lifted and people start returning to offices.
LPG is used mainly by the middle class for cooking. But the poor, aided by a state-sponsored programme, are expected to be the drivers of India's LPG demand in the future. The pandemic has shrunk India's middle class by 32mn in 2020 compared with a pre-pandemic projection and added 75mn to the ranks of the poor, according to Washington-based think-tank Pew Research Center. The poor live on $2/d or less, compared with the middle class at $10-20/d.
Subsidies on LPG have been eliminated and the government gives a meagre Rs27/refill, a tenth of what it was a few years ago. This has prompted some of the 81mn poor — given access to LPG under the PMUY subsidy programme — to switch back to firewood, industry officials said. The annual refill rate of the poor was already less than half of urban consumers' seven refills in the pre-pandemic period.
A recent report from Delhi-based policy think-tank the Council on Energy, Environment and Water found that India's slum population was increasingly switching back to solid biomass because of an inability to afford the high recurring expenditure on refills. Higher LPG rates sans subsidies will only make it harder for use of the fuel to grow in India.
