Govt budgets for sharp LPG price hikes

The finance ministry has slashed the allocation for petroleum subsidy by two thirds to ₹12,995 crore for FY22 despite increasing the number of Ujjwala beneficiaries by 10 million, hoping that gradual price increases for subsidized cooking gas cylinders will reduce the subsidy burden on the government.

“This is part of the long-term clean-up in subsidies. We have been gradually increasing the prices of kerosene and cooking gas. This will continue next fiscal. Every year, we are releasing a lot of arrears also; so, arrears are going down. So, the amount of petroleum subsidy to be released next year is low. It is the effect of cumulative improvement,” a finance ministry official said on condition of anonymity.

Petroleum prices have been on the rise with increase in international crude oil price, the finance ministry official said. However, cooking gas prices are not correlated with crude prices and are still moderate, he said.