Government set to exempt LPG subsidy regime post BPCL strategic sale

The government is set to exempt LPG subsidy regime post BPCL strategic sale. Oil Minister, Dharmendra Pradhan will be seeking Cabinet approval soon, CNBC reported.

The disinvestment in BPCL involves the government making its entire 52.98 per cent stake in the company available to a strategic investor, which includes transfer of management control. The government has not permitted PSUs from bidding for BPCL and expects private sector Indian players and global MNCs to bid for its stake. The government’s stake in BPCL amounts to around around Rs 50,000 crore. The government had received multiple expressions of interest (EoIs) for the strategic sale of Bharat Petroleum Corporation Ltd (BPCL), the Finance Ministry reported on 16 November 2020 — the last day for submission of offers by potential bidders.


‘Give Up LPG Subsidy’ is a campaign that was launched in March 2015 by the Indian Government spearheaded by Prime Minister Narendra Modi. It is aimed at motivating LPG users who are able to afford to pay the market price for LPG to voluntarily surrender their LPG subsidy. The surrendered subsidy is being redistributed by the government in order to provide cooking gas connections to poor families in rural households free of cost.

But the actual implementation was not as visualised as the government froze the price of non-subsidised cylinders between October 2017 and July 2019, as it focused on promoting the PM Ujjwala Yojana, which provided Rs 1,600 cash assistance to incentivise the poor to get new LPG gas connections. This meant that even the full price of the LPG cylinders was in fact still below cost. OMCs started rapidly increasing the price of non-subsidised cylinder since July 2019, which recently led to the first shrinkage of under-recoveries and then an over-recovery situation when the international oil prices crashed recently because of abundant supply and low demand due to COVID-19 crisis. The government’s decision to hike the price of the subsidised cylinder over the past several months along with the recent fall in non-subsidised LPG price thus ultimately led to zero subsidies for the first time in years.

In this recent post, as reported by CNBC, the Oil Ministry has decided to keep BPCL as a divested entity for 3-5 years. BPCL as a divested entity is to aid in the continuation of LPG subsidy post stake sale. Oil Ministry is set to seek Cabinet nod for the same. Transfer of BPCL LPG subsidy consumers is likely between IOC, HPCL.