Government Provides ₹1.23 Lakh Crore Fuel Subsidy, Cuts LPG Quota Amid Rising Costs

The Government of India has stepped up its subsidy support across energy and welfare sectors by providing ₹1.23 lakh crore to oil marketing companies to keep petrol and diesel prices unchanged for 78 days following the outbreak of the Middle East crisis.

At the same time, the fertiliser ministry has sought a doubling of ₹1.77 lakh crore subsidy earmarked for FY27. The request is indicative of increasing costs of services for agriculture, officials say, and the government is spending on energy and agriculture subsidies. The demand is indicative of the fiscal concerns of balancing the support for farmers with other economic pressures.

In a significant policy change, the Centre has also reduced the number of subsidised LPG cylinders available annually to beneficiaries of the Pradhan Mantri Ujjwala Yojana (PMUY). Beneficiaries will now get four subsidised cylinders per year, down from nine previously. In 2016, 12 cylinders were available to households. The quota has been gradually reduced in line with consumption patterns.

Government officials said the new entitlement is based on average household usage levels and also helps to control subsidy costs. India’s LPG import bill has soared, with prices linked to the Saudi Contract Price up 46% since February due to disruptions to the Strait of Hormuz. This has put even more pressure on the subsidy system.

Also Read

India Confirms No Increase Beyond 20% Ethanol Blending in Petrol

In 2022, the Centre had already provided ₹52,000 crore in LPG subsidies, indicating the scale of support that was provided to households through PMUY. The reduction of entitlement is expected to ease fiscal pressure, but it might spark a debate about affordability and access for low‑income families.

And in the end, the government’s recent measures to help consumers with fuel subsidies, fertiliser support, and LPG entitlement changes are all emblematic of the difficult balance between consumer relief and rising oil and gas prices across the world. But with geopolitical tensions and oil and gas market volatility driving the volatility of oil prices and prices of fuels and gas in the months ahead, subsidy management is still something policymakers will have to contend with.