Recent rise in LPG prices

Anurag Vaishnav - February 20, 2020

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.

States and State Legislatures

Government of Karnataka’s response to the COVID-19 pandemic (Feb 2020–April 14, 2020)

Prachi Kaur - April 15, 2020

As of April 13, 2020, there have been 260 confirmed cases of COVID-19 in Karnataka. Of these, 70 have been discharged and 10 have died.[1] In order to contain the spread of the disease, both, the Central and State governments have come up with a series of policy responses. In this blog, we take a look at the key measures taken by the Government of Karnataka in this regard as of April 14, 2020.

Movement restrictions

To contain the spread of COVID-19 in the state, the Government of Karnataka took the following measures to restrict the movement of people in the state:

On March 13, the Directorate of Health and Family Welfare ordered the closure of various establishments such as theatres, pubs, gyms, malls, swimming pools, and educational institutions until March 21. The order also directed all international passenger arrivals to be mandatorily home quarantined for 14 days.[2]
On March 20, the above order was revised to extend the closure of said establishments until April 1. The order also banned all religious gatherings.[3]
Further, on March 23, all bus services to and from the nine districts that had reported COVID-19 positive cases were completely stopped until April 1.[4]
The central government later announced a 21-day country-wide lockdown starting March 25.[5] This was followed by the announcement of a pass system by the Bengaluru Commissioner of Police on March 25 to regulate the movement of people in Bengaluru City.[6]
On April 6, District Collectors were empowered to issue inter-district transport passes.[7]
On April 14, the Prime Minister announced the extension of the lockdown till May 3, 2020.[8] On April 15, the Ministry of Home Affairs issued guidelines on the measures to be taken by governments until May 3. As per these guidelines, to mitigate hardship to the public, select activities will be permitted from April 20 onwards. These include health services, agriculture and related activities, financial sector, MNREGA works, cargo movement etc. In addition, subject to conditions, commercial and private establishments, industrial establishments, government offices, construction activities etc, will also be permitted.[9]

Essential Goods and Services

The pass system in Bengaluru City facilitated the movement of personnel involved in manufacturing and providing essential goods and services.
On April 2, the government announced that it will distribute the excess stock of milk to poor people for free.[10]
On April 6, the government declared that rations for the month of April will be supplied to people without the usual OTP authentication process.[11]

Health Measures

Karnataka Epidemic Disease COVID-19 Regulations 2020

On March 11, 2020, the government released the Karnataka Epidemic Disease COVID-19 Regulations 2020 to prevent the spread of COVID19 in the state. These regulations specify the protocol for hospitals to follow for screening and treating COVID-19 patients. These regulations are valid for one year.[12]

Preventive measures

On February 5, 2020, the Department of Health & Family Welfare and AYUSH services issued the Terms of Reference for district-level teams to take preventive measures against the spread of COVID-19.[13] The terms relate to various administrative and complementary aspects related to COVID19 management. These include activities of various teams, human resource management, training and awareness generation etc.

Following this, on April 6, 2020, the Department also issued instructions to all districts to prepare a District Level Crisis Management Plan to prevent large outbreaks of COVID-19.[14]

Setting up of fever clinics, isolation centres etc

On March 4, the state government issued guidelines to the district administration to ensure hospitals maintain a 10-bed isolation ward for COVID-19 patients.[15]

On March 31, the government issued orders to establish fever clinics as the first points of contact for COVID-19 suspect patients. These fever clinics would have COVID-19 Rapid Response team of one doctor, two nurses and a health care worker.[16]

Personnel measures

On March 30, the Department of Health & Family Welfare invited applications from doctors for immediate appointment (on contract basis) in Urban Primary Health Centres in Bengaluru City.[17] Subsequently, on April 2, the state government issued orders to extend the tenure of retiring medical professionals from March 31, 2020 to June 30, 2020.[18]

On March 26, all Registered Medical Practitioners were permitted to provide telemedicine services during the lockdown period. Telemedicine services will be available for minor, non-COVID-19 ailments, and existing patients only.[19]

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.

[1] Novel Coronavirus (COVID19) Media Bulletin, Karnataka, Department of Health and Family Welfare, last accessed on April 15, 2020, https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/14-04-2020(English).pdf

[2] GOK order No. DD/SSU/COVID-19/17/19-20, Directorate of Health and Family Welfare, Government of Karnataka, March 13, 2020,

https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/Notification(Covid-19)-Dir-HFWS.pdf

[3] Revised GOK order No. DD/SSU/COVID-19/17/19-20, Directorate of Health and Family Welfare, Government of Karnataka, March 20, 2020 https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/Revised-Order-COVID-19(20-03-2020).pdf

[4] Order No. STA-6/SCP/PR-20/2019-20, Directorate of Transport, Government of Karnataka, March 23, 2020, https://transport.karnataka.gov.in/storage/pdf-files/restrictions.pdf

[5] Order No. 1-29/2020-PP, National Disaster Management Authority, March 24, 2020, https://mha.gov.in/sites/default/files/ndma%20order%20copy.pdf.

[6] Order No.02 / CP-BLR/Covid-19/2020, Commissioner of Police, Bengaluru City, March 25, 2020, https://karnataka.gov.in/storage/pdf-files/covid_rules/Covid_pass.pdf

[7] Order of Chief Secretary, Government of Karnataka, April 6, 2020, https://ksuwssb.karnataka.gov.in/frontend/opt1/images/covid/Orders/IMG-20200406-WA0005.jpg

[8] “PM addresses the nation for 4th time in 4 Weeks in India’s fight against COVID-19” Press Release, Prime Minister’s office, April 14, 2020, https://pib.gov.in/PressReleseDetail.aspx?PRID=1614255

[9] No.40-3/2020-DM-I(A), Ministry of Home Affairs, April 15, 2020, https://www.mha.gov.in/sites/default/files/MHA%20order%20dt%2015.04.2020%2C%20with%20Revised%20Consolidated%20Guidelines_compressed%20%283%29.pdf

[10] Proceedings, Government of Karnataka, April 2, 2020, ,https://ksuwssb.karnataka.gov.in/frontend/opt1/images/covid/Orders/GO%20Free%20Milk%20%20(1).pdf

[11] RD 158 TNR 2020, Government of Karnataka, April 6, 2020, https://ksuwssb.karnataka.gov.in/frontend/opt1/images/covid/Orders/IMG-20200406-WA0015.jpg

[12]Karnataka Epidemic Disease COVID-19 Regulations 2020, Government of Karnataka, March 11, 2020, https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/Exercise-of-Powers-COVID-10(11-03-2020).pdf

[13] No. JRO(1A)/148/2019-20, Department of Health & Family Welfare and AYUSH Services Government of Karnataka, February 5, 2020, https://ksuwssb.karnataka.gov.in/frontend/opt1/images/covid/Circulars/%E0%B2%B8%E0%B3%81%E0%B2%A4%E0%B3%8D%E0%B2%A4%E0%B3%8B%E0%B2%B2%E0%B3%86%20%E0%B3%A8%E0%B3%AA.pdf

[14]No. HFW 87 ACS 2020 Department of Health & Family Welfare and Medical Education, April 6, 2020, https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/Circular-Preparation%20of%20District%20Level%20Crisis%20Management%20Plan%20for%20COVID-19(06-04-2020).pdf

[15]Circular No. HFW 47 CGM 2020 (P), Government of Karnataka, March 3, 2020, https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/Guidelines-Isolation-Ward.pdf

[16]No. HFW 73 ACS 2020, Government of Karnataka, March 31, 2020, https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/Circular-Establishment%20of%20Fever%20Clinic%20and%20Movement%20Protocol%20for%20Suspect%20Cases%20of%20COVID-19(31-03-2020).pdf

[17]No. HFW 71 ACS 2020, Department of Health & Family Welfare and Medical Education, March 30, 2020, https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/Order%20-%20Immidiate%20Appointment%20of%20Contract%20Doctors%20in%20BBMP%20(30-03-2020).pdf

[18] No. 40 HSH 2020 (B), Government of Karnataka, April 2, 2020, https://ksuwssb.karnataka.gov.in/frontend/opt1/images/covid/Circulars/Extension%20of%20service%20reg_001.pdf

[19]No. HFW 54 CGM 2020, Government of Karnataka, March 26, 2020, https://karunadu.karnataka.gov.in/hfw/kannada/nCovDocs/Order-Registered%20Medical%20Practitioners%20(26-03-2020).pdf