LPG Subsidy May Be Recalculated: Prices to Follow U.S. Import Costs

New Delhi: The Indian government is considering changes to the way LPG subsidies are calculated. This comes after state-owned oil companies signed annual contracts last month to import LPG from U.S. exporters. Until now, subsidy calculations were based on the Saudi Contract Price (CP), a standard benchmark for LPG imported from West Asia. However, officials now want the formula to include the U.S. benchmark price along with the significantly higher shipping costs from across the Atlantic.

Why the Change?
According to reports, importing LPG from the U.S. is cost-effective for India only if the price discount over Saudi CP is sufficient to cover the shipping expenses. Shipping from the U.S. costs nearly four times more than shipping from Saudi Arabia. Last month, Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum signed a contract to import 2.2 million metric tons of LPG from the U.S. for the year 2026.

Currently, this accounts for approximately 10% of India’s annual LPG imports. While Indian companies have previously sourced LPG from the U.S., it was only via the spot market. This marks the first long-term contract with U.S. exporters.

Current Prices in Delhi
In Delhi, a 14.2 kg domestic LPG cylinder is priced at ₹853, last revised on 8 April 2025. Beneficiaries under the Ujjwala Scheme receive a ₹300 subsidy per cylinder. Commercial 19 kg cylinders are priced at ₹1,580.50. Oil marketing companies typically revise prices on the first day of each month. Globally, crude oil is trading at around $62 per barrel, and India imports roughly 60% of its LPG requirements.

The revised subsidy formula, based on U.S. import prices and freight costs, could lead to a recalibration of LPG subsidies, potentially affecting household and commercial LPG costs in the near future.