After diesel and lately kerosene, subsidy on LPG is also being eased out, in small, virtually unnoticeable steps, reports Siddhartha P Saikia in New Delhi. Taking a cue from the previous UPA government that decontrolled diesel in this manner, the Modi government has upped the prices of subsidised (domestic) LPG refills by around Rs 2 for the second straight month, an attempt to move towards market-determined pricing of the fuel.
Since June, the Modi government has hiked (subsidised) PDS kerosene prices by 25 paise per litre every month.
The price of subsidised domestic cooking gas in Delhi was revised to R423.09 per refill effective August 1, against the R421.16 rate that prevailed in July. In the previous month, LPG cost R419.18 per refill in the capital. Similar hikes in the fuel’s price are effected across the country.
However, neither the petroleum ministry nor any other wing of the government has openly acknowledged the policy of monthly price hikes in PDS kerosene and LPG to weed out subsidy. Thanks to the PAHAL (direct benefit transfer) scheme for LPG subsidy, 3.5 crore bogus connections got eliminated and the Give-It-Up campaign led to over 1 crore people surrendering the subsidy.
With both petrol and diesel decontrolled, the share of LPG and kerosene in oil marketing companies’ under-recoveries has surged in recent years — from about 25% in FY13 to 58% in FY16 for LPG and 18% to 42% during the period for kerosene.
According to the Petroleum Planning & Analysis Cell, the subsidy on a 14.2-kg domestic LPG refill has dropped to R63.91 on August 1 from R116.34 in the previous month.
The Union Budget has provided R26,947 crore for fuel subsidy in the current fiscal, which consists of R19,803 crore for LPG and R7,144 crore for kerosene.
The government had decided to provide a fixed subsidy of R18 a kg under the direct benefit transfer for domestic LPG during April-October 2015, which was revised to R15 per kg in November 2015. The average subsidy on domestic LPG reduced by about 63% to R11.08 a kg in FY16 against R29.63 per kg in FY15. This made the government revise the provision for LPG subsidy downwards by Rs 3 per kg. The benchmark Brent crude oil price fell nearly 44% to an average of $48.73 per barrel in FY16 against $86.6 a barrel in FY15.