By Our Correspondent
NEW DELHI/BHUBANESWAR:The Indian household continues to buy cooking gas much cheaper than the household in any neighbouring country, and far below the price paid in advanced economies such as the United States, Australia and Canada. A beneficiary of the Pradhan Mantri Ujjwala Yojana (PMUY) pays an effective ₹642 for a 14.2 kg cylinder, and the general consumer in Delhi ₹942, against a cost to supply that has now risen to ₹1,600.
The prices of petroleum products in India are linked to the corresponding prices in the international market. The Government, however, continues to modulate the effective price to the consumer for domestic LPG. A PMUY beneficiary continues to receive the direct benefit transfer of ₹300 a cylinder, and so pays an effective ₹642; this support is unchanged. Even an unsubsidised household pays about ₹700 below the market-linked cost of the cylinder. Retail prices differ marginally across locations on account of distribution costs.
What the household does not see is the several hundred rupees per cylinder it has been spared. Through a period of sharp international cost increases, that burden has been absorbed upstream rather than passed to the consumer.
A pass-through that has been held back
The commercial cylinder used by hotels and businesses is revised automatically every month, because its price is a direct pass-through of the international benchmark. The domestic cooking cylinder is not. India used imports more than 60 per cent of the liquefied petroleum gas it consumes, and the landed cost of that import tracks the Saudi Contract Price (CP) that Saudi Aramco sets at the start of each month. This is an external price over which the Indian consumer has no control.
Through the West Asia disruption, the benchmark moved sharply higher. Saudi Aramco sets its contract price separately for propane and butane; expressed as the 50:50 propane-butane blend used for India’s LPG, the Saudi CP for LPG stood at about US$522 a tonne in January, before the disruption. Following the closure of the Strait of Hormuz in late February, the April contract price — the first set after the disruption tightened Mideast Gulf exports — rose to US$775 a tonne, with propane at US$750 and butane at US$800. The blended LPG benchmark thus rose by about half between January and April. The cost of the imported molecule rose with it.
The cost the consumer is not asked to pay
Following the April contract price, the cost of supplying a 14.2 kg cylinder, were it priced on an import-linked basis, has risen to ₹1,600 . The under-recovery now absorbed on each domestic cylinder is of the order of ₹600 to ₹700. The scale of this is visible in the fully market-priced commercial cylinder: the 19 kg cylinder used by hotels and restaurants sells in Delhi at ₹3,113.50, about ₹164 a kg, after five increases during the West Asia crisis. The domestic household, by contrast, pays about ₹66 a kg after the revision. Commercial gas carries a higher rate of tax and larger margins, so it sits above the household’s cost-reflective level; even so, the import-linked cost of a domestic cylinder works out to roughly ₹1,600.
Supply kept moving through the Hormuz disruption
As the conflict tightened the Strait of Hormuz, through which roughly a fifth of the world’s oil and a large share of India’s energy imports pass, most commercial traffic in the waterway was brought to a near halt. About 54 per cent of India’s LPG consumption was routed through the Strait, leaving the cooking-gas supply directly exposed to the disruption. India was among the few that kept its energy cargoes moving. Through sustained coordination, Indian-flagged tankers continued to transit the Strait and discharge at Indian ports, carrying crude oil and successive consignments of LPG. There has been no shortage of any petroleum product, and bottling and distribution have continued normally across the network.
A range of measures was taken to secure supply through the disruption. On the supply side, domestic LPG production was raised by more than 60 per cent, from about 32 TMT to about 52 TMT, to offset the constrained imports. Sustained coordination ensured that LPG-laden vessels continued to move out of the Strait of Hormuz — India brought out the largest number of such vessels of any country, and did so without paying any toll. Sourcing was simultaneously widened to suppliers across the world, including those that do not route through the Strait, such as the United States, Canada and Algeria, and available LPG was directed to households and to priority users such as hospitals and educational institutions.
On the demand side, consumers were encouraged to shift to piped natural gas (PNG) where available, easing the call on cylinders. To protect this scarce domestic supply, anti-diversion enforcement was tightened in coordination with state governments and industry associations: OTP-based delivery verification was raised to about 90 per cent, preventing the leakage of subsidised domestic LPG into the commercial market.
The burden that has been carried
The part of the cost the household is not asked to pay does not disappear. It is borne elsewhere: the marketing companies absorb the gap between the international cost of the molecule and the regulated retail price, and the exchequer compensates a part of it. In the last full year, the under-recovery on domestic LPG alone is estimated to have risen towards ₹60,000 crore, up from ₹41,338 crore the year before. The Union Cabinet has approved compensation of ₹30,000 crore to the marketing companies for LPG under-recovery, and the subsidy continues to reach more than 10.35 crore Ujjwala connections directly.
The Saudi CP benchmark for LPG rose by about half between January and April 2026 as the Hormuz disruption tightened Gulf supply. Through that rise, the cost of supplying a 14.2 kg cylinder moved to ₹1,600. The retail price has now been revised to ₹942 for the general consumer and an effective ₹642 for the Ujjwala household, on which the ₹300 direct benefit transfer is unchanged; even an unsubsidised household pays about ₹700 below the market-linked cost. Indian households, subsidised and unsubsidised, continue to pay less than households in Pakistan, Nepal, Bangladesh and Sri Lanka, and far less than in the United States, Australia and Canada. Through the disruption India was among the few to keep its energy cargoes moving through the Strait of Hormuz, with no shortage of any petroleum product. The marketing companies absorbed an estimated amount rising towards ₹60,000 crore on domestic LPG in the last full year, up from ₹41,338 crore the year before; the Union Cabinet approved ₹30,000 crore in compensation; and the subsidy reaches more than 10.35 crore Ujjwala connections directly.
The effective Ujjwala price of ₹642 is at a discount of about 60% to the actual international price of an LPG cylinder.
Accordingly, the price of the LPG cylinder is being raised by only ₹29 per cylinder, despite the massive rise in international LPG prices and the losses being borne by the PSU Oil Companies.
