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Prices of kerosene, cooking gas will keep rising while subsidy burden will reduce slowly. Read why

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NEW DELHI: Prices of subsidised cooking gas and kerosene will continue to rise gradually and slowly reduce the subsidy burden on the fuels as the government has renewed its directive that allows state-run oil firms to raise prices by a fixed amount every month.

The price of subsidised cooking gas has risen by Rs 22 per cylinder since June, or about 5%, while the price of subsidised kerosene increased by Rs 4 per litre, or about 27%, in the same period. In comparison, prices of petrol and diesel, which are no more controlled by the government, went up just about 1% and 3% respectively. Price of crude oil, from which all these fuels are extracted, increased 6% between June 1 and April 1.

Last year, the government had directed Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum to raise prices of kerosene by 25 paise per litre every fortnight for 10 months that ended in February. It had also directed them to increase cooking gas prices by Rs 2 per month, without indicating how long the hikes can continue.

The oil ministry has issued a fresh order, allowing state firms to raise prices of kerosene by 25 paise/litre per month for another four months beginning April 1, according to industry executives. Similarly, companies have been allowed to increase cooking gas prices by Rs 2 per month until further orders, executives said.

Cooking gas prices rose about Rs 6/cylinder on April 1 to Rs 440.90 in Delhi, a steep hike to compensate for keeping prices unchanged in the quarter to March, when elections to five state assemblies were underway. In Delhi, cooking gas price was Rs 419.18 on June 1, after which state firms started monthly increases. Subsidised kerosene is not supplied in Delhi. But in Mumbai, the price of kerosene jumped from Rs 15.02/litre in June to Rs 19.03 now.

Consumption of cooking gas has risen by a tenth in 2016-17 as record number of new consumers began using gas. State firms enrolled 3.25 crore new consumers to raise the total active consumer base to 20 crore. Most of the new consumers are eligible for subsidised refill and a record addition means not just sharp rise in consumption, but also subsidy. By continuing to gradually raise prices, the government is hoping to keep the overall oil subsidy burden in check, an industry executive said.

Rapid adoption of cooking gas in homes and increased supply of electricity have encouraged the central government to steeply cut subsidised kerosene supply to states. Consumption of kerosene, mostly used by rural poor for lighting and cooking, has dropped by a fifth in 2016-17.

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