PMUY Subsidy Slashed: Govt Caps LPG Refills at Four Annually Amid West Asia Crisis Price Surge

PMUY Subsidy Slashed: Govt Caps LPG Refills at Four Annually Amid West Asia Crisis Price Surge​

Government Cuts Subsidized LPG Refills Due to Global Commodity Price Spike​

The government has made a significant change regarding the Pradhan Mantri Ujjwala Yojana (PMUY) scheme. It has reduced the number of subsidized LPG refills from nine per year down to four annually for beneficiaries. This decision comes as international prices for LPG continue to climb rapidly amid ongoing geopolitical instability in West Asia.

According to officials at the oil ministry, the cost of a domestic LPG cylinder has risen dramatically, reaching over ₹1,600. State-run Oil Marketing Companies (OMCs) are currently incurring an under recovery of ₹700 per cylinder due to this price pressure.

Understanding the New Subsidy Structure for Consumers​

Praveen Khanooja, additional secretary at the petroleum ministry, detailed the revised subsidy structure in a briefing on June 8. He clarified that the government has capped the subsidy amount at ₹300 per cylinder for Ujjwala customers, covering the first four cylinders of the year.

The official pointed out that consumers across all segments are still benefiting from indirect subsidies. Even non-Ujjwala consumers receive an indirect subsidy of up to ₹700 per cylinder. For PMUY beneficiaries, the overall benefit amounts to ₹1,000 per cylinder.

International Market Benchmarks and Pricing Details​

The effective cost of a 14.2 kg LPG cylinder, benchmarked against Saudi CP, stands at over ₹1,600. However, consumers are currently paying ₹942 for a non-Ujjwala cylinder and ₹642 for a Ujjwala customer's cylinder.

This pricing structure represents substantial discounts to the international rate. The government reported that the effective Ujjwala price of ₹642 offers a discount of approximately 60% compared to the actual international price. Non-PMUY consumers benefit from a discount of about 45%.

Financial Impact and Recovery for OMCs​

The financial burden on marketing companies has increased significantly. As per official data, the cumulative under recovery on domestic LPG reached ₹60,000 crore by the end of the last financial year, an increase from the previous year's figure of ₹41,338 crore.

In response to these losses, the Union Cabinet had previously approved compensation amounting to ₹30,000 crore for marketing companies. This compensation is provided in addition to the ongoing subsidy scheme benefit.

Commodity Price Inflation Drives Up Global Benchmark​

The rise in costs is directly linked to international market disruptions. The Saudi CP for LPG was recorded at roughly $543 a tonne in February before the significant supply disruption occurred.

Following the closure of the Strait of Hormuz in late February, the April contract price rose sharply to $775 a tonne. This figure represents an increase that has continued to climb, reaching $790 a tonne by June, according to official data. The blended LPG benchmark thus showed a rise of about 46% since the pre-crisis February level.