India state firms not seen shifting to weekly LPG price reviews despite 2 hikes in Dec

Singapore — India's state oil companies raising domestic LPG rates by Rupees 50/cylinder twice in December in line with steep increases in international prices did not signal a shift to reviewing prices weekly instead of monthly, a source with a national oil company said Dec. 29.

"Due to the hike in LPG prices, the government advised national oil companies to increase prices in phases. The price was increased by 100 rupees per cylinder, so oil firms first raised it by 50 rupees and by another 50 rupees later," he said. "There is no such plan to go for weekly changes in prices," he added.

But the source noted a number of elections were scheduled in the country over April-May 2021 and if international LPG prices keep rising, the government may again review domestic prices.

However, there were no proposals from NOCs to raise prices and the government may not press ahead with changes if international prices were stable, he added.

Polls next year include bye-elections for the Lok Sabha or parliament, elections to the Rajya Sabha or upper house and to the legislative assemblies of four states and one union territory, plus numerous other bye-elections for state legislative assemblies, councils and local bodies.

The FOB Middle East propane price has averaged $448.38/mt to date in December, up from $434.95/mt in November, while FOB Middle East butane has averaged $443.63/mt versus $445.19/mt in November, S&P Global Platts data showed.

In December 2019, the FOB Middle East propane price averaged $497.71/mt and FOB Middle East butane averaged $523.14/mt, Platts data showed.

Indian media reported that government-owned oil firms' Rupee 100 cooking price hike in December was the biggest monthly rise on record, taking a 14.2 kg LPG cylinder in New Delhi to Rupees 694.

The two-phase price hike in December has sparked media speculation that NOCs are planning to change their price reviews to a weekly basis from January versus the long-standing practise of monthly reviews, the source noted.

CUTTING SUBSIDIES

The Indian government has been cutting subsidies on LPG and kerosene over the last three to four months by up to 70% and intends to remove the remainder in coming months, except in the most remote areas, the source said. The removal of the subsidies is being attributed to the sustained fall in global oil and LPG prices earlier in 2020.

The FOB Middle East propane prices has averaged $368.87/mt to date in 2020, down from $423.89/mt in 2019, while FOB Middle East butane has averaged $374.65/mt, down from $438.58/mt, Platts data showed.

According to Indian media reports, the country has about 277.6 million LPG consumers, of which around 15 million have not been eligible for LPG subsidies since December 2016. This leaves around 261.2 million consumers eligible for subsidy relief under the direct benefit transfer scheme, of which around 18 million will not receive any subsidy with the latest developments.

India's LPG imports fell for the second straight month in November, by 2.2% from October to 1.396 million mt, latest Petroleum Planning and Analysis Cell data showed, as consumption declined after major festivities and impacted by lockdowns to limit a COVID-19 resurgence. However, November imports were up 7.2% on year, the data showed.

Total LPG imports over January-November also rose 10.7% on year to 14.72 million mt, the data showed.

The month-on-month dip in November imports came after India imported 1.643 million mt of LPG in October, the highest in at least five years, ahead of major holidays and celebrations.

This kept the country amply supplied with LPG and state-run Indian Oil Corp. has no plans to issue import tenders for January delivery, a source said, adding that demand growth in 2021 was expected to remain in the low single-digit range.