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Last week, oil-marketing companies (or OMCs, such as Indian Oil Corporation Limited and Hindustan Petroleum Corporation Limited) raised the price of domestic LPG in the country. [1]  The price of a domestic cylinder (14.2kg) has increased from Rs 714 in January 2020 to Rs 858.5 in February 2020.  This is a 20% hike in the price of a LPG cylinder.  Note that this is the sixth consecutive month for which LPG prices have been revised upwards.  Figure 1 shows the variation in price of a domestic (non-subsidised) LPG cylinder in Delhi over the last year.

Figure 1: Variation in price of non-subsidised domestic LPG cylinder

 

Sources:  Indian Oil and Corporation Limited; PRS.

How is the price of LPG cylinders determined?

LPG prices are revised every month.  The price is determined by public sector OMCs namely, Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited, in line with the changes in the international market prices and other market conditions. [2]  The international market price affects the import parity price of petroleum products (the price that importers pay for import of product at the respective Indian ports).  This includes exchange rate, ocean freight, insurance and customs duty among others.

The Ministry of Petroleum and Natural Gas has stated that the recent hike in the price of LPG cylinder is due to a sharp rise in international LPG prices during January 2020 (from USD 448/Metric Tonne to USD 567/Metric Tonne). [3] 

What is the difference between the price of a subsidised and non-subsidised cylinder?

The price determined by the OMCs reflects the price of a non-subsidised domestic LPG cylinder.  The government modulates the effective price to provide subsidised LPG cylinders to consumers under the 'Pratyaksha Hastaantarit Laabh' direct benefit transfer (or DBT-PAHAL) scheme. [4]   Under the scheme, a consumer (with annual income of up to Rs 10 lakh) can avail DBT cash-subsidy for a LPG cylinder.   The beneficiaries buy LPG cylinders at market rate and subsequently receive subsidy directly in their bank accounts.  

With the recent increase in price of a LPG cylinder, the government has increased the subsidy amount for PAHAL consumers from Rs. 153.86 per cylinder to Rs. 291.48 per cylinder (89% increase).3   This is done to ensure that the subsidized LPG consumers are insulated from the volatility of LPG prices in the international market.  Table 1 shows the amount of subsidy provided by the government for LPG cylinder.  Note that price of a subsidised cylinder has increased from Rs 494 to Rs 567 (14.8%) from February 2019 to February 2020. 

Table 1: Difference between the price of subsidised and non-subsidised LPG cylinder

As on

Non-subsidised cylinder

Subsidised cylinder

Subsidy

February 2018

Rs 736.00

Rs 495.63

Rs 240.37

February 2019

Rs 659.00

Rs 493.53

Rs 165.47

February 2020

Rs 858.50

Rs 567.02

Rs 291.48

Sources: Unstarred Question No.1211, February 13, 2019, Ministry of Petroleum and Natural Gas, Rajya Sabha.
 Note: Prices are at Delhi. 

How many people avail the subsidy on LPG cylinders?

Currently, there are a total of 27.16 crore LPG (domestic) connections in the country.3  Of these, 26.12 crore (94%) consumers are beneficiaries under the PAHAL scheme, and therefore, can avail LPG cylinders at subsidised rates.  Note that, under the scheme, a maximum of 12 subsidised cylinders per year can be availed under one connection.  Further, a household cannot have more than one connection. 

What is the cost of subsidy for the government?

The subsidy on domestic LPG is met through the budgetary grants of the Ministry of Petroleum and Natural Gas.  In 2020-21, the government is estimated to spend Rs 37,256 crore on LPG subsidy.   This includes Rs 35,605 crore for DBT-PAHAL and Rs 1,118 crore for Pradhan Mantri Ujjwala Yojana.  This is an increase of 9.3% from the expenditure in 2019-20 of Rs 34,086 crore (revised estimate).  Note that LPG subsidy constitutes 87% of the Ministry's total budget (Rs 42,901 crore).   

Figure 2 below shows the year-wise expenditure on LPG subsidy, and as a proportion of the total budget of the Ministry from 2015-16 to 2020-21. 

Figure 2: LPG subsidy over the years (2015-16 to 2020-21). 

Sources: Union Budget Documents; PRS.

For more trends and analysis related to the finances of the Ministry of Petroleum and Natural Gas, see  here

[1] "LPG price hiked by Rs 144.5 per cylinder", Economic Times, February 12, 2020,  https://economictimes.indiatimes.com/industry/energy/oil-gas/lpg-price-hiked-by-rs-144-5-per-cylinder/articleshow/74096745.cms.

[2] Frequently Asked Questions (FAQ), Petroleum Planning and Analysis Cell,  https://www.ppac.gov.in/content/137_3_Faq.aspx.

[3] "LPG Price is Derived based on International Market Price", Press Information Bureau, Ministry of Petroleum and Natural Gas, February 13, 2020. 

[4] PAHAL-Direct Benefits Transfer for LPG (DBTL) Consumers Scheme, Ministry of Petroleum and Natural Gas,  http://petroleum.nic.in/dbt/whatisdbtl.html.

Last week, the Assam Legislative Assembly passed the Assam Cattle Preservation Bill, 2021.  The Bill seeks to regulate the slaughter and transportation of cattle and the sale of beef.   It replaces the Assam Cattle Preservation Act, 1950, which only provided for restrictions on cattle slaughter.  In this post, we examine the Bill and compare it with other state laws on cattle preservation.  For a detailed analysis of the Bill, see here.

Cattle preservation under the Bill

The Bill prohibits the slaughter of cows of all ages.  Bulls and bullocks, on the other hand, may be slaughtered if they are: (i) over 14 years of age, or (ii) permanently incapacitated due to accidental injury or deformity.  Inter-state and intra-state transport of cattle is allowed only for agricultural or animal husbandry purposes.  This requires a permit from the competent authority (to be appointed by the state government).  Further, the Bill allows the sale of beef and beef products only at certain locations as permitted by the competent authority.  No permission for such sale will be granted in areas that are predominantly inhabited by Hindu, Jain, Sikh and other non-beef eating communities, or within a five-kilometre radius of a temple or other Hindu religious institution.

Provisions of the Bill may raise certain issues which we discuss below. 

Undue restriction on cattle transport in the north-eastern region of India

The Bill prohibits the transport of cattle from one state to another (or another country) through Assam, except with a permit that such transport is for agricultural or animal husbandry purposes.  This may lead to difficulties in movement of cattle to the entire north-eastern region of India.  First, the unique geographical location of Assam makes it an unavoidable transit state when moving goods to other north-eastern states.  Second, it is unclear why Assam may disallow transit through it for any purposes other than agriculture or animal husbandry that are allowed in the origin and destination states.  Note that the Madhya Pradesh Govansh Vadh Pratishedh Adhiniyam, 2004 provides for a separate permit called a transit permit for transporting cattle through the state.  Such permit is for the act of transport, without any conditions as to the purpose of transport.

Unrestricted outward transport of cattle to states that regulate slaughter differently from Assam

The Bill restricts the transport of cattle from Assam to any place outside Assam “where slaughter of cattle is not regulated by law”.  This implies that cattle may be transported without any restrictions to places outside Assam where cattle slaughter is regulated by law.  It is unclear whether this seeks to cover any kind of regulation of cattle slaughter, or only regulation that is similar to the regulation under this Bill.  The rationale for restricting inter-state transport may be to pre-empt the possibility of cattle protected under the Bill being taken to other states for slaughter.  If that is the intention, it is not clear why the Bill exempts states with any regulation for cattle slaughter from transport restrictions.  Other states may not have similar restrictions on cattle slaughter as in the Bill.  Note that other states such as Karnataka and Chhattisgarh restrict outgoing cattle transport without making any distinction between states that regulate cattle slaughter and those that do not.

Effective prohibition on sale of beef in Assam 

The Bill prohibits the sale of beef within a five-kilometre radius of a temple (which means an area of about 78.5 square kilometres around a temple).  This threshold may be overly restrictive.  As per the 2011 census, the average town area in Assam is 5.89 square kilometres (sq km) and the average village area is 1.93 sq km.  The three largest towns of Assam by area are: (i) Guwahati (219.1 sq km), (ii) Jorhat (53.5 sq km), and (iii) Dibrugarh (20.8 sq km).  Hence, even if there is only one temple in the middle of a town, no town in Assam – except Guwahati – can have a beef shop within the town area.  Similarly, if a village has even one temple, a beef shop cannot be set up in a large area encompassing several adjoining villages as well.  In this manner, the Bill may end up completely prohibiting sale of beef in the entire state, instead of restricting it to certain places.

Note that certain states such as GujaratRajasthanUttar Pradesh and Haryana completely prohibit the sale or purchase of beef within the state.  However, they also completely prohibit the slaughter of cows, bulls and bullocks.  This is not the case under the Bill, which only places a complete prohibition on slaughter of cows.  Further, in places such as Delhi, municipal regulations prohibit the sale of meat (including beef) within 150 metres from a temple or other religious place.  This minimum distance requirement does not apply at the time of renewal of license for selling meat if the religious place comes into existence after the grant of such license. 

The prohibition on sale of beef in areas predominantly inhabited by communities identified based on religion or food habits (non-beef eating) may also have an unintended consequence.  With the food typically consumed by a community becoming unavailable or available only in select locations, it may lead to the segregation of different communities into demarcated residential areas.  As per the 2011 census, the population of Assam comprises roughly 61% Hindus, 34% Muslims, and 4% Christians.

Onerous requirement for the accused to pay maintenance cost of seized cattle

Cattle rearing is essentially an economic activity.   Under the Bill, cattle may be seized by a police officer on the basis of suspicion that an offence has been or may be committed.  Seized cattle may be handed over to a care institution, and the cost of its maintenance during trial will be recovered from such persons as prescribed by the state government through rules.  Note that there is no time frame for completing a trial under the Bill.  Thus, if the owner or transporter of seized cattle is made liable to pay its maintenance cost, they may be deprived of their source of livelihood for an indefinite period while at the same time incurring a cost.

Cattle preservation laws in other states

The Directive Principles of State Policy under the Constitution call upon the state to prohibit the slaughter of cows, calves, and other milch and draught cattle.  Currently, more than 20 states have laws restricting the slaughter of cattle (cows, bulls, and bullocks) and buffaloes to various degrees.   Table 1 below shows a comparison of such laws in select states of India.  Notably, north-eastern states such as Arunachal Pradesh, Meghalaya, Mizoram and Nagaland do not have any law regulating cattle slaughter.