The great political influence on fuel prices, particularly LPG

Always mentioned in the slew of election promises — whether it is for Assembly polls or General Elections – by the political parties are fuel prices, particularly cooking fuel (LPG).

One party assures LPG for ₹500 a cylinder for a particular section of society, another says ₹400 per cylinder for under-privileged families. Some also promise giving a certain number of cylinders free.

But make no mistake, this is subsidy, and another section of consumers will end up paying for it.

All-important LPG

On why fuel prices become so important during elections and the subsidised cooking gas (LPG) prices being committed by political parties, if voted to power, Narendra Taneja, Energy Expert, said, “LPG has become highly politicised and each party seeking to form government is now targeting the family budget, particularly of lower middle-class and poor households. The cost of LPG cylinder is almost central in the household budget, and that is why it is on the radar of all political parties. However, they may call it by any name, by what is being offered by all parties is nothing but pure and simple subsidy — the old-fashioned subsidy.”

Globally, LPG prices are unlikely to come down, he said, adding, “India is one of the largest consumers of LPG, and the spike we see in global LPG prices is thanks to the ever-rising demand in India. Political parties think BJP’s Ujjwala has delivered political dividends to the party, so they all want to copy BJP in their own way.”

It is a completely different story, however, whether the budget of the these States going to polls can afford the subsidy or not, he added.

Volatility in prices

Asked how prices will behave, given the geopolitical turmoil, Prashant Vasisht, Senior Vice-President & Co-Group Head - Corporate Ratings, ICRA Ltd, said, “The auto fuel prices are expected to remain stable despite the volatility in crude prices and Rupee depreciation. Though there was a spurt in crude prices owing to geo-political issues in October, these have now declined. The domestic LPG prices were cut by the Government of India by ₹200 per cylinder and prices are expected to remain stable in the run-up to the elections.”

The PMUY beneficiaries of domestic LPG currently get an additional subsidy of ₹300 per cylinder, he said.

Interestingly, for almost over a year now the prices of auto fuel have remained flat, while LPG has seen movements. However, all political parties tread cautiously not wanting to upset their vote banks. Overall, the auto fuel prices are expected to remain stable against all odds — the volatility in crude prices and Rupee depreciation — in the run up to the elections.

Data by AJ Vinayak

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