The Indian government has announced a significant reduction in the number of subsidized cooking gas cylinders available to beneficiaries of the Pradhan Mantri Ujjwala Yojana (PMUY). Effective immediately, eligible households will now receive only four subsidized 14.2-kg LPG cylinders annually, down from nine previously.
Why the Ujjwala Subsidy Cut?
According to Praveen Mal Khanooja, Additional Secretary in the Ministry of Petroleum and Natural Gas, this policy shift aligns fiscal support more closely with the actual average consumption patterns observed among Ujjwala households. However, the primary driver for this decision is a sharp increase in global LPG benchmarks, largely attributed to ongoing conflicts in West Asia since late February.
India imports approximately 60% of its LPG, directly linking domestic prices to international rates, particularly the Saudi Contract Price. This global benchmark has surged by an estimated 46% since February, exacerbated by shipping disruptions around the Strait of Hormuz that have tightened Gulf exports.
Impact on Prices and Beneficiaries
The cost of supplying a domestic LPG cylinder has risen above ₹1,600. Despite a recent cumulative increase of ₹89 in domestic LPG retail prices over the past three months, state-run oil marketing companies continue to face an under-recovery loss of around ₹700 on every 14.2-kg cylinder sold. As of June 7, the retail price of a 14.2-kg LPG cylinder in Delhi stood at ₹942, following a ₹29 per cylinder hike.
To mitigate the impact on affordability for Ujjwala beneficiaries, the government maintains a targeted subsidy of ₹300 per 14.2-kg cylinder, which is credited directly to their bank accounts after each refill purchase. This subsidy was increased in October 2023 from an initial ₹200 introduced in May 2022. Consequently, for their first four cylinders, Ujjwala beneficiaries effectively pay ₹642 per refill.
Government's Fiscal Burden
The government has provided substantial support, amounting to ₹52,000 crore in LPG subsidies since 2022. Despite the recent domestic retail price adjustments, officials emphasize that Indian consumers still pay some of the lowest cooking gas rates globally, even amidst severe international supply disruptions. The latest ₹29 increase, for instance, translates to roughly ₹1 per day, or about 20 paise per day for a family of five.
This is not the first time the annual quota has been adjusted; the entitlement was originally 12 subsidized cylinders per year when the scheme launched in May 2016, later reduced to nine last year, and now further scaled down to four.