How govt’s cooking gas plan may hit LPG subsidy gains

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New Delhi | Updated: June 4, 2016 7:45:54 AM

While the direct benefit transfer scheme helped it save a lot on LPG subsidy, the government aims to up the number of domestic cooking gas connections by a steep 50% to 25 crore by 2019, potentially adding over 8 crore subsidised consumers in three years.

lpg subsidyWhile the direct benefit transfer scheme helped it save a lot on LPG subsidy, the government aims to up the number of domestic cooking gas connections by a steep 50% to 25 crore by 2019, potentially adding over 8 crore subsidised consumers in three years. (Reuters)

While the direct benefit transfer scheme helped it save a lot on LPG subsidy, the government aims to up the number of domestic cooking gas connections by a steep 50% to 25 crore by 2019, potentially adding over 8 crore subsidised consumers in three years. If this year’s budgeted oil subsidy of Rs 19,802 crore appears to suffice even if the Indian basket of crude hovers around $50 a barrel as at present, the drive to expand the user base could upset the maths. Given the government’s inability to curb PDS kerosene supplies — under-recovery on kerosene at $50 per barrel for crude is over Rs 15,500, much higher than the budgeted subsidy of Rs 7,144 crore for the fuel — in the next two years, the subsidy figures could potentially skyrocket if global prices harden.

Talking to the media, petroleum minister Dharmendra Pradhan said the government would promote the setting up of new LPG bottling plants, transportation infrastructure, roll out new distributorships and secure long-term LPG import deals to meet the rising demand for the fuel.

State-run oil marketing companies IOC, BPCL and HPCL aim to tie up long-term LPG import contracts to get a better price and undisrupted supply, said Pradhan. Currently, around 60% of India’s LPG requirement is met by domestic production and the balance by imports.

A major feat of the Modi government is that it added more than 3.7 crore new domestic LPG consumers in just two years to take the number to 16.7 crore. Another 5 crore new connections would be offered to women from BPL households under the Pradhan Mantri Ujjwala Yojana till FY19 and the Centre has allocated Rs 8,000 crore for the same.

Pradhan said that with the expansion of the consumer base for clean cooking fuel, the demand for LPG in the country would increase from around 19 million tonnes now to about 25-27 million tonnes in the next three years. “After the launch of the Ujjwala scheme, about 85,000 new LPG connections have been provided to BPL families,” the minister said.

The petroleum ministry has prepared a road map for setting up LPG import terminals, bottling plants, pipelines and creating additional production capacity in the refineries to meet the ballooning demand for domestic cooking gas. About 10,000 new LPG distributors would be set up in 2016, said Pradhan.

In response to a question, he said the government was also working towards bridging the gap between the prices of domestic and commercial LPG. He, however, did not elaborate. Currently, the price for commercial LPG is Rs 979 for a 19.2 kg cylinder in Delhi, while non-subsidised domestic LPG is priced at Rs 548.50 for a 14.2 kg cylinder and subsidised LPG is sold at Rs 419.

When the Modi government came to power in May 2014, there were about 17 crore domestic cooking gas consumers on the rolls. After the launch of PAHAL or the Direct Benefit Transfer of LPG (DBTL) scheme, nearly 3 crore duplicate/fake consumers were weeded out. Another 1.01 crore have voluntarily given up the subsidy, while 0.5 crore consumers did not link their bank account with the LPG connection, and virtually stopped getting subsidy. Currently, of 16.7 crore domestic LPG consumers, 15.2 get the subsidy.

The petroleum ministry on Friday launched unified guidelines for selection of LPG distributors. Unlike the UPA regime, where there were two separate norms for setting up LPG dealers in rural and urban areas, the latest policy puts in place a single policy with four categories — sheheri vitrak, rurban, gramin and durgam kshetriya. There would be 33% reservation for applications from government personnel, the physically handicapped, women, SCs, STs and OBCs.

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