Subsidised LPG price hiked by ₹2.08 per cylinder, non-subsidised by ₹42.50

New Delhi: Domestic cooking gas (LPG) price was Thursday hiked by Rs2.08 per cylinder and non-subsidised gas by ₹42.50 per bottle, Indian Oil Corporation (IOC) said.

The increase comes after three straight monthly reduction in rates.

The rise has been necessitated due to tax impact on increased market rate of the fuel, IOC said in a statement. A 14.2-kg subsidised LPG cylinder will now cost ₹495.61 in the national capital from March 1 as against ₹493.53 currently.

Prior to this, prices had been reduced by a total of ₹13.39 per cylinder.

IOC said non-subsidised or market-priced LPG rates have been hiked by ₹42.50 per cylinder "mainly due to change in international price and foreign exchange fluctuations." It will now cost ₹701.50 per 14.2-kg cylinder in Delhi.

All LPG consumers buy the fuel at market price. The government, however, subsidises 12 cylinders of 14.2 kg each per households in a year by providing the subsidy amount directly in bank accounts of users.

This subsidy amount varies from month to month depending on the changes in the average international benchmark LPG rate and foreign exchange rate.

When international rates move up, the government provides a higher subsidy. And when they come down, subsidy is cut.

According to tax rules, the goods and services tax on LPG has to be calculated at the market rate of the fuel. The government may choose to subsidise a part of the price but tax will have to be paid at market rates.

So, with the rise in market price or non-subsidised LPG price, the tax incidence on subsidised cooking fuel has also increased, leading to the current price hike.

IOC said subsidy transfer has been increased to ₹205.89 per cylinder in March 2019 as against ₹165.47 in February.

Oil firms revise LPG price on 1st of every month.