"The savings in LPG subsidies for the government could be up to Rs 500 crore if subsidy is stopped for this category households, which may have consumption of 1.25 to 1.5 times than average consumption," a statement from ICRA said.

Also, there could be material savings in LPG subsidies if the plan is implemented on a larger scale with a lower income threshold as LPG is used highly in urban areas, which have large population of consumers who can afford unsubsidised LPG prices, ICRA further said.

Assuming consumption of one cylinder every 45 days, the impact on the household budget could be limited to Rs 100-125 per month at the current level of global crude oil and LPG prices, the statement explained.

However, the outgo could be higher if the oil prices were to recover to elevated levels in future.

Further, the benefit of such a step would be more visible over the medium term in a scenario of rise in crude oil prices as the subsidy savings level would be materially higher in case crude oil prices increase from the current low level of approximately USD 35 a barrel.

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