LPG cylinders
LPG cylindersReuters

The government has revised the annual cap on subsidized LPG cylinders to nine from six per household. The Cabinet Committee on Political Affairs (CCPA) which took the decision on Thursday also authorized oil marketing companies (OMCs) to partially deregulate the diesel prices, PTI reported.

Oil Minister Veerappa Moily announcing the CCPA decision said: "I am happy to inform the CCPA has decided to raise the cap on subsidised LPG to nine cylinders per household per year from existing six cylinders. Consumers will get a quota of five subsidised cylinders between September 2012 and March 2013 and from April 1, 2013, they will be entitled to nine cylinders per annum," the Hindu reported.

The petroleum ministry's proposals to increase the price of LPG cylinders by Rs. 50 and hike the price of kerosine in a phased manner were not considered by the CCPA.

The CCPA authorized the OMC's to raise the price of diesel over a period of time till the Rs. 9.60 paise per litre loss incurred by them is covered.

"Oil marketing companies have been allowed to raise diesel prices in small quantities over a period of time," senior oil ministry official G. C. Chaturvedi said Reuters reported.  He did not give details about the time-frame.

The OMC's had complained that the heavy subsidy on domestic LPG and diesel was bleeding state-run oil companies, while the heavy subsidy on domestic fuel prices was contributing to the country's widening fiscal deficit.

India depends on imports to meet 80 percent of its fuel needs. The fuel consumption in India grew 5 percent in the last fiscal year - its fastest pace of growth recorded since 2007-08.   

After the implementation of the subsidy cap, domestic subsidized LPG is available for Rs. 410.50 per 14.2 kg cylinder and domestic non-subsidized 14.2 LPG cylinders cost Rs. 895.50 in Delhi.