By Nikunj Ohri and Sarita Chaganti Singh
NEW DELHI (Reuters) -India increased the cooking gas subsidy for low income households to 300 rupees per cylinder from 200 rupees announced in August amid high inflation and ahead of national polls next year.
India’s retail inflation remained above the central bank’s target band of 2%-6% for a second consecutive month in August and low-income families who form a key voter base have felt the pinch of the rise in food prices over the last few months.
Prime Minister Narendra Modi will soon be facing elections in key Indian states before he seeks a rare third term in national polls next summer.
Wednesday’s announcement will benefit 96 million poor families under the Ujjwala welfare scheme, Information Minister Anurag Thakur said at a press conference.
Thakur did not say how much the latest move will cost the government.
The fiscal cost to the exchequer would be around 36 billion rupees ($432.57 million) annually, said Madhavi Arora, an economist at Emkay Global Financial Services.
In August, the government reduced to 200 rupees ($2.40) the price of a 14.2-kilogram (33 pounds) cooking gas cylinder sold to 330 million households. Previously, the government had estimated it would spend about 116 billion rupees ($1.39 billion) on the cooking gas subsidy in the current fiscal year that ends on March 31.
“As elections are approaching, the government would not want higher inflation to offset their past and recent achievements,” said Sunil Sinha, economist at India Ratings.
India imports about 60% of its liquefied petroleum gas requirement, and LPG prices globally have surged over 300% since April 2020.
Last month, Reuters reported the South Asian country is also considering spending 600 billion rupees to provide subsidised loans for small urban housing over the next five years, a plan which could be announced in the coming weeks.
($1 = 83.2240 Indian rupees)
(Reporting by Nikunj Ohri and Sarita Chaganti Singh; editing by Sudipto Ganguly and Elaine Hardcastle)