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Resource centre on India's rural distress
 
 

Govt targets cheap cooking gas-R Suryamurthy
LPG
Plans are afoot to cap the number of subsidised LPG cylinders at six to eight per annum to reduce the losses of state-run oil firms and bring down the burgeoning subsidy bill.

Oil ministry officials said consumers might have to pay more for every additional cylinder, and the amount would be gradually linked to market rates.

Sources said the finance ministry had asked the oil ministry to revisit its proposal made last year to restrict the number of cylinders.

Subsidy calculations may substantially miss the target this fiscal owing to fluctuations in crude prices and the depreciation of the rupee. The subsidy per cylinder is around Rs 396, and oil marketing companies supply around 32 lakh units a day across the country.

There are fears that the actual subsidy bill for LPG may touch Rs 43,000 crore in this fiscal, whereas the budget has put the bill for diesel, LPG and kerosene combined at Rs 43,580 crore. While in 2010-11 the government spent Rs 38,371 crore on oil subsidy, the expense shot up 78 per cent to Rs 68,481 crore in 2011-12.

Subsidy estimates in last year’s budget were made against the price of crude at $90 a barrel, while the average price during the financial year stood at $115 a barrel.

Global crude prices have fallen below $100 a barrel, but the depreciating rupee against the dollar has eroded the benefit.

Although the cut will not make much of a dent in the Rs 5.13-trillion deficit — about 5.1 per cent of GDP — projected for fiscal 2012-13, it will send a strong message that the government is not wary of taking hard decisions to reduce its subsidy burden.

A 14.2kg domestic cylinder costs between Rs 393 and Rs 405, while a 19.2kg commercial cylinder costs around Rs 1,400-1,600. The price difference often leads to the diversion of domestic cylinders for commercial purposes.

According to analysts, the government must have the political will to restrict cheap cylinders.

Officials said the government planned to act soon to limit the use. As a step in this direction, state-owned oil firms have launched a portal containing data on LPG use by consumers.

Through the portal, consumers can access information on LPG use pattern of any consumer, including ministers and VIPs, cooking cylinder booking status, LPG refill history, highest consumption consumers and subsidy availed.

The information on the portal can also be sorted by consumer number, consumer name and by distributors name.

“The move will not only help in cutting down malpractice by distributors but also provide vital data for the government to push the case for cutting down the number of subsidised cylinder per household in a year,” officials said.

Each 14.2-kg cylinder normally lasts a household 45-60 days. Based on this calculation, a maximum of six to eight cylinders are considered enough to see a family through in a year.

However, the records of LPG distributors show that many households are taking as many as 20-30 cylinders each year.

According to the portal, 42 cylinders were sent to jailed A. Raja’s home. BJP leader Rajnath Singh consumed 80 cylinders, former Union minister M.S. Gill 79, Maneka Gandhi 63, Mulayam Singh Yadav 58, Mayawati 45 and Lalu Prasad 43 in the past one year. Petroleum minister Reddy himself consumed 26 cylinders annually and his deputy R.P.N. Singh bought 37.

While imposing the limit on subsidised LPG, “caution has to be taken as there may be a spurt in new connections and old, inactive connections may become active. Rationing itself will reduce the number of subsidised LPG cylinders sold and, therefore, reduce the subsidy bill of the government,” said a report of the task force, chaired by UIDAI chairman Nandan Nilekani, on ways to plug leakages in the current subsidy framework for kerosene, LPG and fertilisers.