With the relaunch of the direct benefit transfer scheme for LPG (DBTL), the government aims at annual savings of R10,000-12,000 crore in the subsidy on the fuel between itself and upstream oil companies. This factors in the FY14 values for variables like price of the Indian basket of crude and the rupee.
The mission-mode roll-out of the modified DBTL starting with 54 districts where it will be launched next month is expected to be complete by the end of this fiscal or latest by the first quarter of next fiscal, so that potential reduction in subsidies due to the scheme is almost fully achieved for FY16.
Currently, 15 crore domestic consumers (households) benefit from subsidy on LPG, which stands at Rs 404.64 per cylinder or nearly 50% of the market price, and the number of subsidised cylinders per household is capped at 12 a year.
When the UPA government launched an earlier version of DBT to transfer the LPG subsidy to the bank accounts of consumers (instead of selling at the subsidised price), it could cover 6.6 crore consumers in 291 of the 640 districts in the country in phases starting from June 2013. This, it was estimated then, led to a reduction in subsidy of R2,800 crore for FY14. That scheme was subsequently discontinued in January 2014. Which meant that the actual direct transfer due to the phase-wise roll-out and subsequent withdrawal of the scheme in the last quarter of last fiscal would have been far less than what it would have been if all the 6.6 crore consumers covered under the scheme at one point got the their entire subsidy entitlement in their banks since June 2013 to end-FY14.
According to sources, the pan-India roll-out of the scheme, when complete, could lead to savings in excess of R10,000 crore on LPG subsidy for the succeeding year, assuming the relevant variables remain at FY14 levels. Of course, because of the fall in global crude oil prices, the overall subsidy bill or the oil marketing companies’under-recoveries — which are almost totally made good by the government and the upstream oil companies — is estimated to be R28,000 crore this year, compared with R46,458 crore last year. Also, the relaunched DBTL will barely pan out this year and so the reduction in subsidy due to the scheme this year would be correspondingly less, not just in absolute terms but also as a fraction of the under-recoveries on the fuel.
Subsidised cylinders meant for households are diverted to the commercial sector, which is ineligible for subsidy. Average LPG consumption per household as per data available with the petroleum ministry is 6.7 cylinders a year, much lower than the current cap of 12 for subsidised cylinders.
In FY14, LPG under-recoveries accounted for 33.21% of the total OMC losses of R1,39,869 crore in selling fuel. In FY15, the total under-recoveries are expected to hover around R86,000 crore, of which 32.5% or R28,000 crore is expected to be the subsidy on domestic cooking gas.
In March this year, the Supreme Court directed the then UPA-led government to withdraw all its orders that made Aadhaar compulsory for availing of the government's services and sops. The three-judge bench headed by justice BS Chauhan also ordered the Unique Identification Authority of India not to share any information of an Aadhaar card holder with any other agency. In September last year, the apex court had ruled that the card cannot be a prerequisite for public services.
Currently, a subsidised 14.2-kg LPG cylinder costs R414, after a discount of R404.64, while a 19-kg commercial refill costs R1,472.50 in the national capital. There are 15 crore household and 20 lakh commercial consumers of LPG in India. DBTL-enabled subsidy savings will be mainly by the weeding out of fake connections.
The petroleum ministry has observed that when the cap was fixed at six cylinders (in September 2012) in a year, the growth in domestic consumption dropped to 1% while use by non-domestic buyers rose 15%. However, soon after the cap was hiked to nine refills (in January 2013), the growth in domestic consumption too increased to 3.5% but growth of commercial LPG usage dropped by 4%, clearly showing the extent of diversion.
Source: Financial Express
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