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Looking into LPG cap revision demand: Moily

Posted on Nov 23, 07:31PM | IBNS

Union Petroleum and Natural Gas Minister M. Veerappa Moily on Friday said representations have been received to revise the annual cap, which is being looked into.

As per the decision of Cabinet Committee on Political Affairs (CCPA) the price of cylinders beyond the cap of 6 per year would be available at market rate to be notified by the Public Sector Oil Marketing Companies (OMCs) on monthly basis.

In a written reply in the Lok Sabha, he also emphasized that in order to insulate the common man from the impact of rise in international oil prices and domestic inflationary conditions, the government continues to modulate the retail selling price of subsidized Domestic LPG, among others, resulting in incidence of under-recoveries to the OMCs.

"The OMCs are currently incurring under-recovery of Rs. 478.50 per 14.2 Kg subsidized Domestic LPG cylinder (based on the refinery gate price effective 1.11.2012). In addition, Government provides a fiscal subsidy of Rs. 22.58/cylinder on domestic subsidized cylinder," Moily said.

"During the year 2011-12, the OMCs incurred under-recovery of Rs. 1, 38,541 crore on sale of Diesel, PDS Kerosene and Domestic LPG. The OMCs need to be compensated in order not only to maintain their financial health but also to allow them to generate resources for capital expenditure, modernization and acquisition of assets for future growth," Moily said.

He also said that on Sept 13 the government decided to restrict the supply of subsidized domestic LPG to each consumer at 6 cylinders (of 14.2 kg) per annum.

"However, the base price of the subsidized domestic LPG cylinders was not revised. The increase of Rs. 11.50 per cylinder w.e.f 5th/6th October, 2012 was on account of revision in the Distributor's commission," he said.

The Minister further said that the government only modulates the price of domestic subsidized LPG.

Oil Marketing Companies are free to fix prices of other categories of LPG in consonance with prevailing international prices, he said.

"The price of domestic subsidized LPG is based on import parity price as recommended by Dr. Rangarajan Committee in 2006."

"As per the Refinery Gate Price on 1st November 2012, the Retail Selling Price of domestic subsidized LPG at Delhi is Rs. 410.50 per 14.2 kg cylinder. As reported by OMCs the current price of domestic non-subsidized 14.2 LPG cylinders is Rs. 895.50 at Delhi."

"The Free on Board (FoB) Price at Arab Gulf, taken as the international price benchmark, translates to Rs 738 per 14.2 kg cylinder.

"The difference in the FoB price at Arab Gulf and the price of a 14.2 kg non-subsidized cylinder at Delhi is on account of ocean freight from Arab Gulf to Indian ports, import related charge, inland freight, marketing cost and margin, cylinder bottling charges and distributor commission," said Moily.