Modi Govt Announces Rs 30,000 Crore LPG Subsidy To Insulate Middle Class From Fluctuations In Gas Prices

New Delhi: The Union Cabinet chaired by Prime Minister Narendra Modi has approved a compensation package of 300 billion rupees (3.4 billion dollars) for state-run oil marketing companies to offset losses from selling subsidised cooking gas. Ashwini Vaishnaw, Minister for Railways, Information & Broadcasting, Electronics & Information Technology, said on Friday that the amount will be paid in 12 tranches to Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.

The government’s move will help oil companies continue crude procurement, service debt and sustain capital expenditure. “As gas prices are impacted by geopolitics, the subsidy will insulate the country’s middle-class families from any negative impact,” Vaishnaw said at a media briefing.

In addition, the government has allocated 120.6 billion rupees for a scheme to provide subsidised cooking gas connections to women from nearly 100 million poor households under the Pradhan Mantri Ujjwala Yojana (PMUY).

The Cabinet also approved a targeted subsidy of Rs 300 per 14.2 kg cylinder for up to 9 refills per year, proportionately pro-rated for 5 kg cylinders, to PMUY beneficiaries during FY 2025-26. The expenditure for this subsidy is estimated at Rs 12,000 crore.

Launched in May 2016, PMUY aims to provide deposit-free LPG connections to adult women from poor households. As of July 1, 2025, there are 10.33 crore PMUY connections across India. Beneficiaries receive a deposit-free LPG connection that includes a security deposit for the cylinder, a pressure regulator, a Suraksha hose, a domestic gas consumer card booklet and installation charges. Under Ujjwala 2.0, the first refill and stove are also provided free of cost.

To shield PMUY beneficiaries from sharp fluctuations in international LPG prices and ensure sustained usage, the government started a targeted subsidy of Rs 200 per 14.2 kg cylinder for up to 12 refills per annum in May 2022. This was increased to Rs 300 in October 2023.

The increased support has helped improve LPG consumption among PMUY households. Average per capita consumption, which was about 3 refills in 2019-20 and 3.68 refills in 2022-23, has risen to 4.47 refills during FY 2024-25.

The decision comes at a time when Prime Minister Narendra Modi has taken a strong stand against US President Donald Trump after Washington imposed a 50 percent tariff on India. Speaking at the M.S. Swaminathan Centenary International Conference, Modi said, “For us, the welfare of our farmers is of the highest priority. Bharat will never compromise on the interests of its farmers, dairy farmers, and fishermen. And I am fully aware that I may have to pay a very heavy price personally, but I am prepared for it. For the farmers of my country, for the fishermen of my country, for the dairy farmers of my country, Bharat stands ready today.” Trump has linked the additional 25 percent tariff to India’s continued purchase of Russian oil.

The Cabinet move also comes against the backdrop of ongoing negotiations with the United States for a free trade agreement. Reports suggest that the US has sought greater access to Indian agricultural markets, particularly the dairy sector, and the ability to export produce such as soybeans, corn, almonds and apples. The Samyukt Kisan Morcha, an umbrella body of several farmers’ organisations, has demanded that the Centre place the details of the negotiations before Parliament and ensure that no agreement is signed without the House’s approval.