New Delhi: The Government on Monday announced a reduction in the domestic cooking gas (LPG) prices. As per Indian Oil Corporation (IOC), the price of  subsidised LPG cylinder has been reduced by Rs 5.91, while the rate of non-subsidised LPG cylinder has been slashed by Rs 120.50.

Following the price cut, a subsidised LPG cylinder will cost Rs 494.99 in the national capital as against Rs 500.90 currently. The new rate will be effective from midnight tonight. Notably, this is the second straight monthly reduction in LPG price on account of tax impact on the reduced market rate for the fuel.

Earlier on December 1, subsidised LPG price was cut by Rs 6.52 per cylinder, after six consecutive monthly hikes in rates since June.  Prior to this price cut, rates had gone up by Rs 14.13 per cylinder since then. Subsidised LPG rates were last hiked by Rs 2.94 per cylinder with effect from November 1. IOC said non-subsidised or market priced LPG rates have been cut by a steep Rs 133 per cylinder to reflect fall in international oil rates and strengthening of the rupee. It will now cost Rs 809.50 per 14.2-kg bottle in Delhi.

All LPG consumers have to 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. As per tax rules, GST 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 fall in market price or non-subsidised LPG price, the tax incidence on subsidised cooking fuel has also come down, leading to the current price reduction. “Accordingly, the upfront cash payment by the consumer for purchase of domestic LPG refill will reduce by Rs 133 cylinder, i.e. from Rs 942.50 per cylinder to Rs 809.50 cylinder in December, 2018 in Delhi market,” IOC said.

Subsidised cooking gas consumers will get Rs 308.60 per cylinder subsidy in their bank accounts for the month of December. The subsidy transfer in the customer’s bank account has been reduced from Rs 433.66 in November.

(With inputs from agencies)