Rise In LPG and Fuel Prices – The Burden on Consumers

The recent decision by the Union government to increase the price of domestic LPG cylinders by Rs 50, coupled with a Rs 2 hike in excise duty on petrol and diesel, has sparked concerns across the country. While fuel price adjustments are often dictated by global market trends and fiscal policies, the timing of this hike raises questions about its necessity, especially when global oil prices have witnessed a significant decline. This article critically examines the economic and social implications of these price hikes.

The LPG Price Hike: A Pressing Concern for Households

Cooking gas is an essential commodity for households, particularly in urban and semi-urban areas where alternative fuel sources are limited. The Rs 50 hike in domestic LPG prices translates into a significant burden for middle- and lower-income families, who are already grappling with inflationary pressures. The Pradhan Mantri Ujjwala Yojana (PMUY), which was launched to provide affordable LPG connections to economically weaker sections, may see reduced effectiveness as affordability becomes a growing concern.

The increase in LPG prices comes at a time when global crude oil prices have seen a substantial drop. This raises the question: why has the government chosen to increase domestic LPG prices rather than pass on the benefits of lower international rates to consumers? Some argue that the government’s decision is aimed at balancing fiscal deficits, while others see it as an unnecessary burden on common citizens.

Govt’s ‘Affordable’ LPG Prices

Despite skyrocketing international LPG prices, Union Petroleum and Natural Gas Minister Hardeep Singh Puri insists that the government is committed to ensuring "affordable" cooking gas for consumers. Of course, affordability is a relative term, especially when it comes with a price hike.

Under the revised pricing, a 14.2 kg LPG cylinder now costs ₹1,028, but Ujjwala beneficiaries will get it at a "subsidised" rate of ₹553 - a whole ₹475 less than the market price! Meanwhile, regular consumers can rejoice over a ₹175 reduction, making their cylinders available at ₹853 instead of the full-blown market rate.

Puri rationalized the hike, stating that it was necessary to help oil marketing companies (OMCs) recover financial losses from previous subsidies that were "significantly lower than international market rates." He assured that this "price adjustment" would be closely monitored and reviewed, ensuring that future revisions align with global price fluctuations, while, of course, keeping public interest at heart. Because what could be more reassuring than knowing the price could go up again at any time?

Excise Duty on Petrol and Diesel: A Justified Move or an Economic Setback?

At a time when global crude prices are on a steady decline, the Rs 2 hike signals a fresh focus on ramping up government revenues for possible capital expenditure after tax relief given in the Union Budget 2025.
While this move may help bolster government finances, it comes at the cost of increased transportation and production expenses, which are ultimately passed on to consumers.

Petrol and diesel are key drivers of economic activity, influencing prices of essential goods and services. Higher fuel prices mean increased transportation costs, which could lead to inflation in food prices and other commodities. This is particularly concerning for a country like India, where a significant portion of the population depends on agriculture and daily commuting for their livelihoods.

Political and Social Repercussions

The increase in LPG and fuel prices is bound to have political ramifications. With several state elections on the horizon, opposition parties are likely to use this issue to criticize the government’s economic policies. Previous fuel price hikes have led to widespread protests, and a similar backlash can be expected this time.

For the common citizen, these hikes translate into an immediate increase in household expenses. A higher LPG price means increased cooking costs, while costlier petrol and diesel will impact daily commuting, transportation of goods, and overall inflation. The middle-class and lower-income groups, already struggling with rising food and utility costs, will be hit the hardest.

A more balanced approach—considering both revenue needs and public affordability—would be the way forward. Unless the government takes proactive steps to cushion the impact of these hikes, public discontent and economic strain will continue to mount.