Lpg Case Study

Objective:

To study the impact of the LPG Cylinder pricing policies and subsidy on the Indian economy.

Why this topic?

LPG cylinder (Liquefied Petroleum Gas ) is used for domestic cooking purposes in many states as a main fuel source. The 14.2 kg cylinder is used for domestic usage and 19 kg for commercial usage and government has also introduced 5 kg cylinder for domestic and commercial usage. According to the 2011 census data carried out in India, 35 million (30 %) Indian households used LPG as cooking fuel, which is increasing 3-4 % by every year and other main source of fuel is kerosene.

LPG Gas cylinder price is available for all states in India like New Delhi, West Bengal, Maharashtra, Tamil Nadu, Tripura, Mizoram,

After 2002, only certain products (namely kerosene and liquefied petroleum gases, or LPG, often used for cooking or home heating) remained regulated, while oil companies could set their own prices for other fuels. The government began domestic fuel price reform and officially deregulated gasoline prices in June 2010 (to take effect in 2012). High international oil prices in recent years and growing demand for oil products have increased the country’s fiscal deficit as a result of its mounting fuel subsidy bill. Two state-owned companies, the Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), control the majority of production and refining activity in India. ONGC is India’s largest oil producer, accounting for about 69% of the domestic production in 2012 according to the company’s annual report.

The Indian government has been giving subsidy on LPG cylinders in the lieu of promotion of use of these sources as fuel instead of the conventional sources such as coal, firewood, ect. Domestic LPG is subsidized. Even though domestic LPG cost price is directly related to international prices, oil marketing companies were selling at the government decided issue price. Government was then compensating them for selling LPG below the

It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.

Increased use of LPG cylinders will lead to the high growth that will effect on both the household and business sectors. LPG purchases are necessary for most households. When LPG prices increase with a subsidy, a larger share of households’ budgets is likely to be spent on it, which leaves less to spend on other goods and services. The same goes for businesses whose goods must be shipped from place to place or that use fuel as a major input. Higher oil prices tend to make production more expensive for businesses. In case of higher usage of LPG in industries also make a higher cost of