The central government has announced a significant policy shift regarding the Pradhan Mantri Ujjwala Yojana (PMUY), resulting in a substantial reduction in the number of subsidized LPG cylinders available to beneficiaries. According to the latest update, the quota of subsidized cylinders has been slashed from 9 per year to just 4. This move marks another step in the government's ongoing adjustments to the subsidy structure of the flagship scheme, which was originally designed to provide clean cooking fuel to women in low-income households.
Evolution of the Ujjwala Subsidy Quota
The Pradhan Mantri Ujjwala Yojana was launched in May 2016 with the primary objective of providing deposit-free LPG connections to adult women from poor families. 2 kg each every year. However, this quota has seen gradual reductions over time, while last year, the government lowered the limit from 12 to 9 subsidized cylinders. The latest decision to further reduce this to 4 cylinders represents a significant change for millions of households that rely on this support for their daily cooking needs.
Official Justification for the Reduction
Praveen Mal Khanooja, the Additional Secretary in the Ministry of Petroleum and Natural Gas, addressed the media in a press conference to explain the rationale behind this decision. He stated that the revised limit of 4 cylinders roughly aligns with the average annual consumption of Ujjwala beneficiaries. The government’s data suggests that most households under this scheme don't work with more than 4 cylinders in a year, making the previous quota of 9 cylinders exceed the actual requirement for many.
Subsidy Structure and Current Pricing
2 kg LPG cylinders in May 2022. This subsidy was designed to be credited directly into the bank accounts of beneficiaries after each refill purchase, for up to 12 cylinders a year. 2 kg cylinder, with proportional benefits extended to 5 kg cylinders as well.
However, this reduction in the subsidized quota comes at a time when LPG prices have been on the rise. 2 kg cylinder has increased by a total of 89 rupees following two hikes in the last three months. The most recent increase occurred on June 7, bringing the retail price to 942 rupees. 2 kg cylinder. Khanooja noted that on June 7, the price of cooking gas was increased by 29 rupees per cylinder, which he described as an increase of 1 rupee per day. For a family of five, he calculated this hike to be equivalent to just 20 paise per day.
International Market Pressures and Supply Costs
The government highlighted that despite the price increases, Indian households are paying some of the lowest prices for cooking gas globally, especially considering the sharp rise in international LPG prices due to disruptions in West Asia. Khanooja explained that since the conflict in West Asia began in late February, international prices have surged, pushing the supply cost of domestic LPG cylinders to over 1600 rupees. India's LPG import costs are linked to the Saudi Contract Price (CP), which is the global benchmark. This benchmark has risen by approximately 46 percent since February, primarily due to supply constraints in the Gulf region linked to the Strait of Hormuz.
Financial Impact on Oil Companies
The financial burden of maintaining these prices is significant. The government has provided 52000 crore rupees in subsidies since 2022.2 kg cylinder. Beyond LPG, these companies are also facing losses on petrol and diesel, which are being sold below cost. The under-recovery on petrol was 6 rupees per liter, while for diesel, it was approximately 30 rupees per liter. Overall, oil companies are facing losses between 600-700 crore rupees. 50 rupees per liter in four installments last month, and CNG prices were raised by 6 rupees per kg.