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In a recent announcement, Hardeep Singh Puri, the Minister of Petroleum and Natural Gas, stated that the Indian government would absorb the cost of the promised ₹200 reduction in household cooking gas cylinder prices. This move is intended to relieve oil marketing companies (OMCs) from an estimated impending loss of ₹7,500 crore. As a gesture ahead of Raksha Bandhan, the Union Cabinet had already decided to decrease the price of a 14.2-kilogram LPG cooking gas cylinder by ₹200. This decision comes in the wake of mounting criticism towards the government's management of rising inflation.

Oil Minister's Support for Collaboration in Price Management

 The oil minister emphasized the need for clarity in addressing the financial impacts resulting from fluctuations in energy prices. He expressed the view that the Centre and the OMCs should collaborate to protect the financial interests of the common citizens. Commending the Narendra Modi-led administration for its proactive step in reducing LPG cylinder prices, he noted that the decision has garnered widespread appreciation across the nation. He also commended the government's efforts in expanding access to home LPG connections, effectively reaching a larger population.

Positive Impact on Consumers and OMCs

 The direct price reduction of ₹200 for LPG cylinders is expected to benefit both Ujjwala (subsidized) and non-Ujjwala (non-subsidized) customers. This move is aimed at shielding them from the current wave of retail inflation. The oil minister pointed out that OMCs showed a robust performance in the first quarter of the fiscal year 2023, with a positive outlook for the second quarter. While initially facing losses, OMCs rebounded with the support of the government. This approach not only stabilized the economy but also protected consumers from macroeconomic shocks.

India's Strategic Oil Procurement Approach

 The minister emphasized India's strategic approach to oil procurement, emphasizing the priority of acquiring oil at the most competitive prices from various suppliers. He highlighted that India would source oil from any supplier that delivers it to Indian ports at the lowest possible cost. Since the West imposed sanctions in response to Russia's actions in Ukraine, India has been receiving discounted crude oil from Russia, which has become a key exporter for the country. As the world's third-largest importer and consumer of oil, India relies on imports for over 80% of its oil needs.

Market Reaction and Conclusion

 The financial markets responded to the news with shares of major oil companies, such as Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd, and Hindustan Petroleum Corporation Ltd, seeing a decline of over 1% to 2.5% during the trading session. The government's decision to bear the cost of LPG price reduction highlights its commitment to easing the financial burden on oil companies and shielding consumers from inflation. This proactive approach reflects the government's dedication to maintaining economic stability and public welfare.3