LPG prices to inch up

NEW DELHI: Houswives may now have to shell out up 95 paise more per cylinder, as the government plans to round off the retail selling price of LPG to the next rupee.

The move will help oilcos to reduce their losses by up to Rs 0.95 for every LPG cylinder sold. For example, the cost of one LPG cylinder in Chennai is Rs 288.15, but the distributor will “officially” charge Rs 289/cylinder from customers. Similarly, in Delhi, a consumer will have to pay Rs 295 for every cylinder even as its retail price is Rs 294.50/cylinder.

The proposal has come at a time when every single paise counts for oil marketing companies (OMCs) like IOC, BPCL and HPCL, which are losing money due to huge under-recoveries (selling products below the cost price). The issue has been raised by IOC on behalf of all OMCs. The company has said that LPG distributors face difficulties in returning appropriate change to cooking gas consumers as coins of small denominators are no longer available in the market.

The government agency Petroleum Planning & Analysis Cell (PPAC) has endorsed IOC’s proposal. “In view of the fact that minting of small coins has been discontinued by the RBI, we may agree with the industry’s proposal of rounding off of domestic LPG retail prices to the next rupee,” PPAC said in a letter to the petroleum ministry. It also suggested that the “differential” should be retained by the OMCs.

The proposal if implemented, will entail an increase in LPG cylinder price from a minimum five paise to 95 paise in the market all over India. According to end users, even now they end up paying an extra amount as distributors express their inability to return the small balance (up to 95 paise). But the extra amount collected from consumers are pocketed by distributors. If the proposal goes through, the extra money will go into oilcos’ coffers.

PPAC has highlighted this point in its letter: “Since the oil marketing companies are already suffering huge under-recoveries on sale of domestic LPG, rounding off the retail sale price to next rupee will not result in any undue over-recovery to the OMCs.”

As per a government notification in 1982, the end price of LPG cylinder is to be rounder off to the nearest multiple of 5 paise. This system is continuing till date. Difficulty in returning small denomination has been felt by OMCs after the RBI has withdrawn small coins up to 25 paise.