LPG gas price hike: Cylinder rates increased by Rs 42.50; even these users must pay extra Rs 2.08

LPG gas price hike has been announced after three straight monthly cuts in rates. According to Indian Oil Corporation, the rate hike has been necessitated due to tax impact on increased market rate of the fuel. Image source: Reuters 

A 14.2-kg subsidised LPG gas cylinder will now cost Rs 495.61 in the national capital from March 1 as against Rs 493.53 currently. Prior to this, prices had been reduced by a total of Rs 13.39 per cylinder. Image source: Reuters

LPG gas price for non-subsidised or market-priced rates have been hiked by Rs 42.50 per cylinder "mainly due to change in international price and foreign exchange fluctuations." LPG gas price will now be Rs 701.50 per 14.2-kg cylinder in Delhi. Image source: Reuters

All LPG gas consumers buy the fuel at market price. The government, however, subsidises 12 cylinders of 14.2 kg each per household in a year by providing the subsidy amount directly in bank accounts of users. This subsidy amount varies from month to month depending on the changes in the average international benchmark LPG rate and foreign exchange rate. Image source: Reuters

When international rates move up, the government provides a higher subsidy. And when they come down, subsidy is cut. According to tax rules, the goods and services tax (GST) on LPG has to be calculated at the market rate of the fuel. Image source: Reuters

Centre may choose to subsidise a part of the price but tax will have to be paid at market rates. So, with the rise in market price or non-subsidised LPG price, the tax incidence on subsidised cooking fuel has also increased, leading to the current price hike. IOC said subsidy transfer has been increased to Rs 205.89 per cylinder in March 2019 as against Rs 165.47 in February. Image source: Reuters