1. Fake arguments: Those underestimating LPG savings don’t get it

Fake arguments: Those underestimating LPG savings don’t get it

The best solution to LPG subsidies, there can be no doubt, would be one where the government slowly reduced them as was done in the case of diesel by the UPA – over a period of time, as the fuel finally got deregulated, there would be zero subsidies.

By: | New Delhi | Updated: October 9, 2015 5:00 PM
LPG subsidy clynders

On LPG, the government’s maths was simple: 30 crore people were removed from the rolls and with an average per cylinder subsidy of Rs 361 in FY15 and a cap of 12 cylinders per person, this works out to Rs 12,996 crore. (Reuters)

The best solution to LPG subsidies, there can be no doubt, would be one where the government slowly reduced them as was done in the case of diesel by the UPA – over a period of time, as the fuel finally got deregulated, there would be zero subsidies. The NDA, however, chose not to do that and put a cap on the subsidy instead – of course, with global prices falling, the government pays out a lot less than the Rs 18 per kg cap; so when prices start rising again, the government will pay more than the Rs 99 it is paying per 14.2kg cylinder right now. None of this, however, should take away from the massive success achieved by linking subsidies to bank accounts and Aadhaar – it is based on this that the government claimed it had saved Rs 12,700 crore in FY15 and is likely to save around half this amount this year. This number, however, has been challenged by the Canadian International Institute for Sustainable Development (ISID) and widely publicized in Indian newspapers. ISID puts the actual savings at Rs 143 crore, a fraction of what the government claims, much to the delight of many opposed to either it or the Aadhaar programme. The analysis, however, doesn’t account for the fact that savings take place at two levels.

Assume there are 100 persons who can theoretically get a food subsidy of Rs 100 per month, but when the government decides to get the biometrics of these people, and runs this through the Aadhaar de-duplication software to remove fake or ghost subscribers, this gets reduced to 75. Now, assume the government tells people that they have to go to the ration shop and get their biometrics checked in order to get this subsidy – let’s say that only 70 people actually bother to go to the shop. The most accurate way to calculate the saving is 30 x 100 or Rs 3,000 per month – the ISID method, however, would calculate the subsidy as 5 x 100 or Rs 500. To get back to LPG, the government’s maths was simple: 3 crore people were removed from the rolls and with an average per cylinder subsidy of Rs 361 in FY15 and a cap of 12 cylinders per person, this works out to Rs 12,996 crore. You could argue, rightly, the actual consumption per registered user is only 7, so the subsidy saving is Rs 7,581 crore, but there is no doubt the savings are substantial.

Indeed, were the ISID methodology to be used, Aadhaar is really a waste of time – whether it is a breach of privacy is really moot then. In various states like Andhra Pradesh where considerable progress has been made in taking the biometrics of those availing PDS, for instance, the number of people entitled to benefit from it fell from 4.53 crore to 3.86 crore after de-duplication, or by 15%. If roughly 3.7 crore of these people actually take the trouble of going to the PDS shop each month to get rations, that works out to a saving of just 4%, a number that doesn’t really add up to much, especially in contrast to the 18% the conventional methodology throws up. Whether you are in favour of Aadhaar or against it, let’s not get the arithmetic wrong.

  1. M
    Mukesh Kamath
    Oct 9, 2015 at 9:48 pm
    There might be a technical solution to the aadhaar(privacy) problem. SC should advise the government to search for one such as launching a hidden UID number under the existing aadhaar layer. And making it illegal to hold a database with aadhaar numbers while legal to hold a UID number seeded database. The UID number which would be known only to machines could be any digits long and humanly impossible to remember. Also it should not be possible to get aadhaar number from UID number. Then how do you seed UID numbers into the database using aadhaar number. This is a technical challenge that needs to be overcome. It can be solved by any good techie. Also needless to say it should not be possible to collate or profile an individual by two agencies knowing his/her UID number.
    Reply
  2. S
    sabse
    Oct 9, 2015 at 5:36 pm
    India is a poor nation so it should not promote LPG and kerosene in subsidized or less taxed form. LPG and kerosene should be used but in non subsidized and taxed form like motor fuels because it is imported and costly than solar , induction , coal and waste (bio ) gas. Using LPG and kerosene as subsidized untaxed form in presence of their infinite free to cheap indigenous subsutes for getting votes has finished Indian economy .SO use as much as LPG as possible but in unsubsidized and taxed form. Abolition of cooking fuel subsidies and taxing them equal to motor fuels can bring motor fuel prices down to finish stagflation. Along with this infinite free to cheap subsutes of all petro products should be promoted which are above four which I have enumerated above and four other for motor fuels namely railways , m commutation , 24x7 reasonably priced electricity and rain water harvesting . Thank you dearest 125 crore Indians
    Reply
  3. S
    sabse
    Oct 9, 2015 at 5:37 pm
    India is a poor nation so it should not promote LPG and kerosene in subsidized or less taxed form. LPG and kerosene should be used but in non subsidized and taxed form like motor fuels because it is imported and costly than solar , induction , coal and waste (bio ) gas. Using LPG and kerosene as subsidized untaxed form in presence of their infinite free to cheap indigenous subsutes for getting votes has finished Indian economy .SO use as much as LPG as possible but in unsubsidized and taxed form. Abolition of cooking fuel subsidies and taxing them equal to motor fuels can bring motor fuel prices down to finish stagflation. Along with this infinite free to cheap subsutes of all petro products should be promoted which are above four which I have enumerated above and four other for motor fuels namely railways , m commutation , 24x7 reasonably priced electricity and rain water harvesting . Thank you dearest 125 crore Indians
    Reply

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