1. Centre goes for deeper LPG sops cut

Centre goes for deeper LPG sops cut

Seizing the opportunity presented by a narrowing of the difference between subsidised and market prices of LPG bottles, the government has turned more aggressive in its efforts to deny the subsidy to the relatively well-off.

By: | New Delhi | Updated: February 19, 2016 1:09 AM
lpg subsidy

Seizing the opportunity presented by a narrowing of the difference between subsidised and market prices of LPG bottles, the government has turned more aggressive in its efforts to deny the subsidy to the relatively well-off. (Reuters)

Seizing the opportunity presented by a narrowing of the difference between subsidised and market prices of LPG bottles, the government has turned more aggressive in its efforts to deny the subsidy to the relatively well-off. Households with an annual income of above Rs 10 lakh will not receive the subsidy in bank accounts from April 1, official sources told FE.

Text messages sent recently to LPG consumers by the three state-run oil marketing companies (OMCs) read as follows: “If your/spouse income is above (R) 10 lacs, LPG subsidy is not admissible as per govt directive. If so, submit a declaration to your distributor or at www.mylpg.in.”

While this on the face of it would seem a reiteration of the December 2015 statement by the petroleum ministry where it said that the subsidy “will not be available for LPG consumers if the consumer or his/her spouse had taxable income of more than Rs 10,00,000/- during the previous financial year,” the OMCs’ text message is in fact sterner for two crucial changes: The OMCs are merely speaking of “income”, which is typically higher than “taxable income” (up to a quarter in case one is at the lower end of the highest 30% tax slab) mentioned in the ministry’s December circular and second, they are silent on “self-declaration” of income by the consumers.

Sources said whether or not the consumers defined as above declare their income, the government would get to know of his/her income from their Aadhaar-seeded bank accounts and stop giving LPG subsidies if the income is found to be above the threshold.

“You have submitted your Aadhaar number with us and the same is with the bank. IndianOil would track your account and if your total income is more than Rs 10 lakh a year, subsidy would automatically be stopped,” said a South Delhi-based distributor.

Currently, there are about 270 million households in the country and 163.5 million domestic LPG connections. Nearly 3% of the total households or 8.1 million have an annual income level of more than Rs 10 lakh, according to the all-India survey for FY15 by Delhi-based People Research on India’s Consumer Economy (PRICE). However, taxpayers with an annual taxable income of more than Rs 10 lakh as per the tax authorities’ data basis is just about 2 million.

The crash in global crude oil prices has brought down the subsidy amounts drastically. Currently, a subsidised domestic LPG refill costs Rs 419.22, while its price sans subsidy is Rs 575 in the national capital, much lower than around Rs 1,000 per refill in early 2014. Coupled with this, the government’s efforts to reduce the subsidy are also helped by the success of the direct benefit transfer (DBT) scheme on LPG (PAHAL). As of January 1, 2015, when PAHAL went pan-India, the number of registered LPG consumers stood at 181.9 million. Thanks to the scheme that restricted LPG refills to 12 a year and led to transfer of the subsidy directly to the bank accounts of intended beneficiaries, the number fell to 148.5 million by April 1.

Of course, the connections have since swelled to 163.5 million, partly because commercial users of LNG, a fraction of which used to be disguised as household consumers, have come clean.

The “GiveItUp” campaign launched by Prime Minister Narendra Modi in March 2015 has led to 6.5 million consumers surrendering their LPG subsidies. This has resulted in provisions of LPG connections to more than 5 million rural households, according to the petroleum ministry.

In the first nine months of FY16, the government has forked out Rs 12,093 crore towards subsidising domestic cooking gas. The subsidy was Rs 36,580 crore in FY15 while it was Rs 46,458 crore in FY14.

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