Cooking gas in India is the cheapest

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 over ₹1,600.

The final column shows how far the effective Ujjwala price of ₹642 a cylinder sits below the price in each market. Sources: Government sources and national regulators.

The prices of petroleum products in India are linked to the corresponding prices in the international market.

 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 to import 60 per cent of its LPG requirements, 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. Expressed as the 50:50 propane-butane blend used for India’s LPG, the Saudi CP for LPG stood at about US$543 a tonne in February, 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, and has since edged up further to US$790 a tonne in June.

The blended LPG benchmark has thus risen by about 46% since the pre-crisis February level. The cost of the imported molecule rose with it.

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.