Announcing the decision taken by the Cabinet Committee on Political Affairs, Oil Minister M Veerappa Moily said raising the LPG quota will cost Rs 5,000 crore in additional subsidy annually.
Households will get one cylinder extra, on top of the quota of 9 cylinders, in February and March and from April they will be entitled for 12 cylinders -- one cylinder per month at subsidised rates, he said.
Moily also said the direct benefit transfer for LPG (DBTL) scheme, where consumers in as many as get 289 districts in 18 states got the subsidy amount in their bank accounts so that they could buy cooking gas at market rate, has been put on hold.
Explaining the reasons behind the move to put on hold a scheme that was dubbed 'game-changer, he said there were complaints about implementation of the scheme and a committee has been formed to look into them.
"Pending the committee examining the issues, the Aadhaar-linked LPG subsidy transfer has been put on hold," he said.
DBTL, under which consumers got Rs 435 advance money in their bank accounts so as to help them buy a LPG cylinder at market price, was this month extended to 105 districts including Delhi and Mumbai.
Currently, a subsidised LPG cylinder costs Rs 414 while the market price comes to Rs 1,021.
Congress vice president Rahul Gandhi had at the All India Congress Committee session earlier this month asked Prime Minister Manmohan Singh to increase the quota of subsidised LPG to 12 cylinders of 14.2-kg each.
There had also been demands from within the Congress to scrap the DBTL as many consumers did not either have the Aadhaar number or banks accounts linked to the Aadhaar number.
Moily said 89.2 per cent of the 15 crore LPG consumers use up to nine cylinders in a year and only 10 per cent have to buy the additional requirement at the market price.
After the quota is raised to 12, about 97 per cent of the LPG consumers would be covered by subsidised LPG, he said.
The government had initially capped the supply of subsidised domestic LPG cylinders to six per household annually in September 2012 in a bid to cut its subsidy bill. The quota was raised to nine in January 2013.
Consumers, who have exhausted their quota, have to buy LPG at the market price of Rs 1,258 per cylinder. Subsidised LPG costs Rs 414 per cylinder in Delhi.
India raises subsidy on cooking gas ahead of elections
(Reuters) - India's coalition government on Thursday increased the subsidy on cooking gas, acceding to popular demand as it gears up for a tough national election due by May.
The decision to increase the cap on annual sales of subsidised cooking gas cylinders to 12 from 9 per household was made days after Rahul Gandhi, vice president of the ruling Congress party, demanded a raise in the ceiling.
The move, which will cost the exchequer 50 billion rupees ($800.5 million), comes at a time when federal finances are under pressure in the face of weak tax receipts in a slowing economy and high public spending.
It also flies in the face of Prime Minister Manmohan Singh's commitment to trim spending on fuel subsidies, which is at the heart of his struggle to balance the federal budget.
But Manish Tewari, information and broadcasting minister in Singh's cabinet, said the government would not shy away from taking consumer-friendly decisions.
"Let there be no ambiguity that the UPA (coalition)government will not put any consumer to any hardship at all," he said.
The Congress party is racing against time to win back voters, disenchanted by a slew of corruption scandals and a dramatic decline the country's economic fortunes on its watch.
The ruling coalition is trailing in opinion polls and many analysts believe it is unlikey to win a third term in power.
Under the subsidies, households will be entitled to buy the cylinders at less than half the market price. It is a highly popular, and sometimes vital, scheme in this country of 1.2 billion people.
The ruling party is also seeking to protect its turf from the Aam Aadmi - or Common Man - Party (AAP), which is threatening to draw support away from the poor, Congress' main voters.
The AAP government in the national capital has slashed power and water prices, sparking demands by lawmakers in other states for similar reductions.
In the lead-up to the national election, investors fret that the party, known for its penchant for populist welfare schemes, will shun the tough economic reforms needed to revive an economy that is growing below its slowest pace in a decade.
The Congress-headed government in the western state of Maharashtra last week decided to cut electricity tariffs by a fifth with immediate effect.
High government spending on subsidies such as food, fuel and fertiliser coupled with slower-than-budgeted tax receipts have made it tougher for Singh to deliver on the government's pledge to narrow the fiscal deficit to 4.8 percent of gross domestic product (GDP) in the fiscal year to March 2014.
The fiscal deficit by November had reached nearly 94 percent of the government's full-year target, piling pressure on Singh to find alternative sources of revenue.