Ahead of the direct benefit transfer (DBT) scheme rollout for subsidizing LPG cylinders, the oil ministry has begun a clean-up act to eliminate black market activity in the segment by classifying 26 million LPG connections as ‘suspect’ cases, said sources. This means close to one in five of the 145 million LPG connections in the country are under probe for possible fraud.
Each household is eligible for one LPG connection through which it can buy nine subsidized cylinders (14.2 kg) a year. This can be used only for household cooking needs. However, multiple connections are rampantly secured and used to sell cylinders in the black market or in commercial units.
The first phase of the DBT rollout is expected to kick off in 20 districts from June 1. By cleaning up the existing fraudulent LPG connections, the oil ministry is hoping to prop up the nascent DBT scheme for LPG subsidies, the main objective of which is to check bogus cards, ghost consumers and misuse.
As part of this exercise, the oil marketing companies (OMCs) have since October blocked close to 6.4 million fraudulent LPG connections in the country. This crackdown on the fraudulent accounts by OMCs – Indian Oil (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) – has so far saved the exchequer around Rs 2,365 crore annually.
A subsidized LPG gas cylinder in Delhi costs Rs 410.50, while non-subsidized LPG cylinders costs Rs 847. Households can legally retain multiple connections, but they must declare that subsidy will not be claimed for the additional connection.
A ministry official said so far OMCs have blocked only fraudulent intra-company connections or multiple connections with one OMC. The official said they will soon start cracking down on fraudulent inter-company LPG connections or multiple connections from more than one OMC.
As per the DBT scheme, LPG consumers will get about Rs 4,000 per annum in cash from the government in their bank accounts and they will have to then buy LPG at market price of Rs 901.50 per 14.2-kg cylinder. The subsidy on account of LPG cylinders in 2012-13 stood at Rs 39,558 crore. The government is estimated to save R15,000 crore annually through the DBT scheme for LPG and kerosene.
The DBT scheme is also seen as beneficial for OMCs as their distributing agencies will get the market rate for selling all LPG cylinders without a lag. Currently, the subsidy from the government comes to OMCs after a lag.
