Explained: Why LPG Cost More During UPA Than Post 2014 NDA Regime

Recent posts viral on LPG cylinders do not take into account international prices of LPG; its bulkiest component.

A viral social media message, comparing the yearly prices for liquified petroleum gas (LPG) is circulating on social media, claiming higher prices under the UPA regime as compared to the Narendra Modi government since 2014. Targeting Congress leader Rahul Gandhi, the viral message shows the prices of LPG between 2011 - 2014 (a period corresponding to the government of United Progressive Alliance - 2, led by the Congress), and the prices falling 2015 onwards (when the National Democratic Alliance came to power, led by Prime Minister Narendra Modi).

However, on examining data from the Petroleum Planning and Analysis Cell, of the Ministry of Petroleum and Natural Gas, BOOM found that these prices are linked to international pricing benchmarks, which were high during 2011 to 2014, but have since shown a steep decline. The viral message does no show the 'free on board' prices, which is the international factor of the prices, forming the single largest part of the cost component of LPG price buildup. These FOB prices in turn reflect into the pricing of the LPG that eventually reaches the consumer.

Further, the numbers from these claims - which have been taken from Indian Oil - have been selectively picked.

Here's all you need to know about the claim, and how consumer LPG prices are arrived at.

1. What is the claim?

The viral message lists the price of LPG as a singular price point for a year, ranging from 2011 to 2021.

The claims can be seen below. It has been made several times on social media.

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2. Where are these prices from?

These are the prices of non-subsidised 14kg Indane gas, taken from Indian Oil Corporation. All these prices correspond to Delhi.

This can be found here. It consists of the prices from 2013, updated to February 2021 - from where the 2021 price figure of the claim has been taken.

For one particular year, there could be anything from 12- 15 price points, which implies that for that particular year, there could be multiple price points for a given month.

Further, in the chart, the prices for Mumbai, Chennai and Kolkata are given too, which means an LPG price point could be more or less in other cities than what is given in Delhi.

The claim take the prices as of December 1 for 2015, 2016, 2017, 2018 and 2019. For 2018, the claim mistakenly mentions the price as '₹609' when in fact it is ₹809.50.

Secondly, in the year 2014, the January price is taken (₹1,241). However, in the month of December the same year. the prices were at ₹752.

3. How are LPG prices broken down?

A variety of factors go into the LPG pricing. The breakdown of the prices is available with the PPAC, and can be seen below. It consists of everything from the 'free on board charges', delivery, transportation, bottling, and taxes tosubsidies when it reaches the final consumer.

The single-largest component, the 'free on board' (FOB) prices, is the buildup component of the LPG price structure linked to international prices. Along with freight and import charges, it translates to the price paid by oil marketing companies to the refiners. It is based on the concept of import price parity - which means the prices charged at the border of the country. This translates to higher prices abroad, meaning higher prices domestically, and vice versa.

The PPAC, in their Ready Reckoner as of November 2018, defines FOB prices as:

FOB (free on board) of LPG is weighted average of Saudi Aramco contract price (CP) for butane (60%) & propane (40%) for previous month and also includes daily quotes of premium / discount (published by Platts Gaswire) averaged for the previous month.

This can also be seen in a PPAC document on the price buildup of various petroleum products here.

4. What has been the historical FOB prices of LPG?

A compilation of data from the PPAC shows that yearly, the FOB prices of LPG have been falling since 2011 - 2012.

Since November 2017, the PPAC has also been releasing the FOB prices of LPG monthly. This frequency includes data up to February 2021, where the FOB price is at $527.80/MT. These prices have still not come close to the high levels of 2011 - 2014.

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