Govt suspends its prized LPG subsidy transfer scheme

Written by ENS Economic Bureau | New Delhi | Updated: Jan 31 2014, 14:26pm hrs
LPG subsidyThe cancellation of the DBTL is the biggest setback for the Aadhaar roll-out plan. Reuters
The government on Thursday postponed a key reform element of the oil and gas economy it had launched with fanfare, the direct benefit transfer scheme (DBTL), under which cooking gas consumers were to receive cash subsidy using their Aadhaar numbers.

The cancellation of the DBTL is the biggest setback for the Aadhaar roll-out plan since this was the Centres most visible and successfully implemented one among the 28 government schemes, which run on the platform. Oil minister Veerappa Moily said the Cabinet Committee on Political Affairs has decided to suspend the scheme since there were protests that the linkage between Aadhaar numbers and bank accounts had not been established in many areas. A committee has been set up to examine the issues, he said.

As per Planning Commission data, between June and December 2013, the government has transferred Rs 3,200 crore to the bank accounts of 20.7 million LPG customers, who had got the linkage in 291 districts. This is about 20 per cent of the total 100.3 million LPG customers. While the figure means one in five LPG customers has an Aadhaar-enabled bank account, the number has reached the current level in less than a year.

In September 2013, the DBTL beneficiaries were only 21.9 million for whom the government had transferred Rs 222 crore subsidy in 54 districts. The numbers have leapfrogged, since then.

The DBTL scheme allowed the subsidy, instead of being paid to the public sector oil marketing companies, to reach the accounts of the customers directly. In the Aadhaar universe, till now 560 million Indians have got their card that assigns a unique number and identification to each of them at a cost of Rs 4,060 crore to the government.

This is expected to cut down the huge cost of government oil subsidy that has reached Rs 1,61,029 crore in FY13. Of this, LPG subsidy accounted for Rs 40,000 crore.

The DBTL method is expected to shave off about Rs 5,000 crore from the government expenditure in a year. The move had also been praised by investors as a welcome move to reduce corruption in the retail oil economy by blocking the incentive to divert the cooking cylinders. A ministry of petroleum report says, The ceiling in number of subsidised cylinders and blocking of duplicate or multiple connections had begun to bring down the consumption of subsidised domestic cylinders since September 2012. The trend has reversed only since September 2013.

In each of the 291 districts in 18 states, those on the DBTL platform have begun to get Rs 435 each in their bank accounts. But Moily said that to ensure that customers are not inconvenienced, a committee will be constituted which will review only the implementation of DBTL. Pending the review, consumers will get subsidised cylinders as they were getting earlier, he told reporters at a Cabinet briefing.

This means the government will revert to pay subsidy to oil firms. Moily, however, said that the postponement was not an admission of failure. We are quiet proud and happy that this programme has gone on very well. Even if there is a marginal error, we need to correct it.