The government on Tuesday announced a Rs 200 per cylinder cut in prices of domestic cooking gas to soften the impact of rising inflation on households as well as counter the promise of cheaper LPG made by the Congress party in upcoming assembly elections.

At present, a 14.2-kg LPG cylinder in the national capital costs Rs 1,103 - more than double the rate it came for in May 2020.

It will cost Rs 903 when the decision is implemented from Wednesday.

For Ujjwala beneficiaries, the price will be Rs 703 after considering the continuing Rs 200 per cylinder subsidy.

Announcing the decision, Information and Broadcasting Minister Anurag Thakur said the move is aimed at providing relief to households.

Also, the government will provide an additional 75 lakh Ujjwala connections, which will take the total PMUY beneficiaries to 10.35 crores.

Commenting on the decision, Prime Minister Narendra Modi the festival of Raksha Bandhan is a day to enhance happiness in the family and the decision to cut prices will greately help women.

"Every sister of mine should remain happy and healthy, that is my wish from the God," he said in a post on X, formerly known as Twitter.

Cooking gas prices have shot up in the last couple of years and have become a major election issue.

The Congress party used the high LPG prices, which had burnt a hole in the budgets of households already reeling under high inflation, effectively in the recently concluded assembly elections in Karnataka. It has promised to give LPG at Rs 500 per cylinder if voted to power in Madhya Pradesh, where elections are due in November-December. The Congress is also providing the LPG at the same price in Rajasthan, where elections are due in November-December.

Thakur however refused to link the decision with elections saying it was a gift from the Modi government to women on the occasion of Onam and Raksha Bandhan.

While he did not say how the price cut would be financed, it is presumed that state-owned fuel retailers will from Wednesday reduce the prices and will get compensated for the same by the government later.

It is not known how much the decision would cost the exchequer but Thakur said the Rs 200 per cylinder subsidy provided to Ujjwala consumers would cost Rs 7,680 crore in the current financial year ending March 31, 2024 (April 2023 to March 2024).

While Ujjwala beneficiaries are only 9.6 crore, there are some 33 crore domestic cooking gas users in the country.

The government in June 2020 stopped giving LPG subsidies. Cooking gas across the country was priced at market rate, which rose to Rs 1,103 in the national capital.

The only subsidy that was available was for poor women who got free connections under Pradhan Mantri Ujjwala Yojana. The government gave Rs 200 per cylinder subsidy for up to 12 refills in a year. This subsidy was transferred into the bank accounts of the beneficiaries, who bought LPG at market price from the dealer.

The move to cut prices by Rs 200 would bring back the subsidy regime unless the government were to ask the oil companies to absorb the cut and not compensate them.

The government in October 2022 provided a one-time grant of Rs 22,000 crore to oil companies to cover for the losses they had incurred on selling LPG at below cost in the previous two years.

"In a move that will bring respite to households across the nation, the Government has announced a substantial reduction in the price of cooking gas. Effective August 30, 2023, the price of a 14.2 Kg LPG cylinder will be reduced by Rs 200 in all markets across the country.

"In Delhi for instance, the decision will bring down the cost of a 14.2 Kg cylinder from the existing Rs 1103 per cylinder to a more affordable Rs 903 per cylinder," an official statement said.

This across-the-board reduction is in addition to the existing targeted subsidy of Rs 200 per cylinder to PMUY (Ujjwala) households, which will continue.

For PMUY households, therefore, the effective price in Delhi after this reduction will be Rs 703 per cylinder, it said.

To clear pending PMUY applications and to provide deposit-free LPG connections to all eligible households, the government will shortly start distribution of PMUY connections to 75 lakh women from poor households who do not have an LPG connection.

This will increase the total number of beneficiaries under PMUY from 9.6 crore to 10.35 crore, the statement said.

"These decisions come as part of the government's ongoing efforts to ease the financial burden on citizens and promote the welfare of households. The reduction in cooking gas prices reflects the government's commitment to prioritize the well-being of its citizens and ensure access to essential commodities at reasonable rates," it said.