The entire calculation of subsidy on domestic gas cylinders (LPG) is about to change in India. According to reports, state oil companies have signed annual supply contracts with US exporters last month. Due to this, the government is considering changing the formula of LPG subsidy. Currently, the subsidy is calculated based on the Saudi contract price (CP), which is standard for LPG supplies from the Middle East. However, state oil companies are now insisting on including the US standard price and logistics costs of trans-Atlantic shipment in the formula. LPG from the US will be economical for India only if the price discount compared to Saudi CP is large enough to offset the logistics cost, which is about four times higher than that of shipments from Saudi Arabia.
First long-term contract from US
Last month, Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd signed a one-year contract to import about 2.2 million metric tonnes per annum (MMTPA) of LPG from the US for the 2026 contract year. This is about 10 percent of India’s annual LPG imports. Although Indian companies have previously purchased US LPG in the spot market, this is their first long-term contract for supplies from the country. The government controls the price of LPG sold to households by government companies. When companies incur losses by selling below the market rate, the government compensates them.
As mentioned above, the logistics cost of LPG from the US will be four times higher than that of LPG coming from Saudi Arabia. If the Indian government wants to continue providing subsidized gas cylinders to the public at the current rates, a deep discount on US supplies is necessary. If this does not happen, the government may cut the subsidy in the coming days. This means that LPG gas cylinders may become more expensive for common citizens, including millions of customers of the Ujjwala scheme.
What is the current price?
According to IOCL data, the current price of a domestic gas cylinder in the national capital Delhi is ₹853 with subsidy. The price of commercial gas cylinder is ₹1,580.50. The last change in the price of domestic gas cylinder was on April 8, 2025, when the government increased the price by ₹50. On the other hand, users currently get a subsidy of ₹300 under the Ujjwala scheme. As of December 1, 2025, the number of beneficiaries under the Ujjwala scheme in the country is 10.35 crore. In the current financial year, 25 lakh beneficiaries have been added to this scheme. The total number of LPG users in the country is approximately 33 crore.
