To make LPG more popular among all stakeholders — producers, buyers as well as sellers — the Ministry for Petroleum & Natural Gas is seeking further reforms in its pricing.

Dharmendra Pradhan, Minister for Petroleum and Natural Gas, and Skill Development, told BusinessLine that his Ministry had taken up the matter of correcting the existing anomalies in LPG pricing, including tax disparity between public and private players with the Finance Ministry. He, however, maintained that the government had no plans to do away with retail end subsidy offered to the deserving customers.

“LPG can be replaced in all sectors where there is a need for heating treatment. It is cheaper and cleaner than the existing fuels. But, there is a need for further reforms in the subsidy mechanism, pricing and taxes levied on it,” said Pradhan, who was among the four Ministers elevated to Cabinet rank on Sunday.

Advantage PSUs

Currently, the LPG market is dominated by public sector players, who have two advantages — one, under-recoveries (notional loss incurred for selling the fuel below the cost price) are borne by the government, and two, they enjoy import duty exemption.

PSUs also have a price advantage over private players. While private players pay five per cent import duty on LPG, PSUs pay zero duty.

The total demand at present is about 21-22 million tonne annually, of which almost 50 per cent (about 10-11 million tonne) is met through imports. To create competition and attract private participation, pricing anomalies have to be corrected and level playing field created.

Pradhan said: “There should be tax parity between PSUs and private companies. I am pushing the Finance Ministry to do away with this tax differential. It will also be the best way to prevent diversion of domestic LPG for commercial use.” “State governments are not strictly enforcing the law in curbing use of domestic cylinders in commercial enterprises. Central PSU officials are not able to take any action due to the support of local strongmen for the subsidy diversion,” he said.

Besides, once these anomalies are corrected, the subsidy burden on the exchequer will be lowered and competition will allow for cheaper imports, he said, adding that “This financial reform will help boost consumption of cheaper clean fuel in the country.”

Asked about whether the government proposes to do away with the subsidy component at the retail end, Pradhan said: “Subsidy component will remain. But, the question is should all 18.5 crore households (that are enjoying subsidy) get the LPG subsidy? “The government has no intention of cutting subsidy for the poor. The subsidy quantum fluctuates between ₹30 and ₹100 per cylinder these days. That works out to less than ₹1,200 per household annually. The current value of subsidy is ₹70 per cylinder, the total subsidy is then less than ₹500 annually.”

Targeting subsidies

But, what the government wants to know is that should the well to do be entitled to this amount, asks Pradhan.

On the Pradhan Mantri LPG Panchayat, the second phase of LPG campaign, he said: “Under this phase we will look into delivery, service and targeted subsidy for consumers. This will take forward the progress made under Pradhan Mantri Ujjwala Yojana (PMUY).” Pradhan said “complaint and grievance redress mechanism will have to be linked to high end technology. This is a primary area of service. We also need to look at the safety aspect. We need to reach a zero accident scenario, which is not easy at all. The safety aspects and parameters of LPG need an awareness campaign.”

Today, recipients of PMUY connections, who have been on board for a year, are going in for four refills in a year, while wealthier consumers are going in for seven refills, he said. “We notice that this gap being bridged as LPG adoption becomes more common. It is a socio-behavioural change. We have hiked the compensation for deaths due to fatal accidents during LPG cylinder usage from ₹1 lakh to ₹6 lakh,” he added.

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