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BR Research

LPG: Retailers’ robbing poor consumers

  From the peak of Rs1791 per cylinder in January 2020, Liquified Petroleum Gas (LPG) retail price was slas
Updated 06 Apr 2020

 

From the peak of Rs1791 per cylinder in January 2020, Liquified Petroleum Gas (LPG) retail price was slashed to Rs1067 per cylinder by Ogra for April 2020. In month-on-month terms, the prices came down by 30 percent, as the prodcuers’ base price was reduced by half in just a month.

The oil price crash has a direct impact on LPG prices, which is reached at using different weights for two derivatives, propane and butane. The distribution margin on LPG has been fixed at Rs413 per cylinder – and for April it constituted 40 percent of the retail price, as distributors’ base price came down to Rs444 per cylinder.

LPG prices are supposed to be regulated, where the maximum selling price cannot exceed the one announced by the regulator. The distribution margins in the case of LPG are already on the higher side, and nothing compared to the minuscule margins in the case of petrol and diesel. The retailers always have the option to sell it lower than the Ogra announced rate – an occurrence which has not been rare.

But the last two months have seen the actual market prices not going down in accordance with law. Consider this, Ogra announced a reduction to the tune of Rs463 per cylinder for April 2020. The actual market price reduction has only been Rs239/cylinder. And this comes on the back of an already higher than market price.

In the CPI consumption basket of goods, LPG has a weight of 0.99 for rural and 0.5 for urban consumers. The rural consumption basket does not have natural gas, and LPG substitutes a great deal for the heating purposes. It is clearly a fuel for the lower income class, which is being robbed off in broad daylight. It is quite striking that the PBS collects and reports market prices, month after month, and the regulator does nothing, to sort it out. For a regulated item, the poor consumers surely deserve better than this.

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