Direct subsidy transfer put on hold; new subsidy limit to be effective from February 1

With an eye on the forthcoming general elections and an informal diktat from Congress Party Vice-President Rahul Gandhi, the Government on Thursday increased the quota of subsidised domestic LPG cylinders to 12 from 9 annually per household.

The Government has also put on hold the direct transfer of LPG subsidy into the consumers’ bank accounts. Simply put, consumers will continue to pay only the subsidised price to their LPG distributors and in turn the public sector oil marketing company will get the subsidy from the Government.

Increasing the cap will benefit nearly 14 crore domestic LPG consumers, the Government said adding that the increased subsidy cap will be effective from February 1. However, for the current fiscal (2013-14) the total number of subsidised cylinders available for each household will be restricted to 11, as there are only two more months left.

On January 17, Rahul Gandhi had asked Prime Minister Manmohan Singh to consider raising the limit from 9 to 12.

After the Cabinet Committee on Political Affairs (CCPA) meeting on Thursday, Petroleum & Natural Gas Minister M Veerappa Moily said that the decision will increase the LPG subsidy outgo by ₹5,000 annually taking it to ₹85,000 crore.

Currently, the market price of a 14.2-kg domestic LPG cylinder is ₹1,258, but after the subsidy, it costs ₹414 for the consumer. Part of the loss incurred by the oil marketing companies is met by upstream companies such as ONGC, Oil India and GAIL, and the balance by the Government.

On how the subsidy cap works, an official explained if one exhausts the quota of 12 before the year ends and needs a refill, he will have pay the market price for the refill.

Usually, one can book the second cylinder after 21 days of the earlier booking and the cylinder usually gets delivered after 4-5 days. So the consumer gets, on an average, one cylinder a month.

Meanwhile, the domestic LPG dealers are worried about being stuck with market price linked cylinders, as almost 90 per cent of the consumers have already exhausted their quota of 9 subsidised cylinders.

“We have lifted these stocks from the companies, now we will have to wait for a communication on whether they will reimburse us or not,” a local dealer said.

Subsidy transfer

Citing complaints in implementation from consumers as well as State Chief Ministers, Moily said that an ‘in-principle’ decision has been taken to form a committee to look into the complaints and till it gives the report, the direct benefit transfer for LPG will be on hold. “The constituents of and time line for the committee will be decided in due course of time,” the Minister added.

‘Game changer’

Termed as a ‘game changer,’ under the Direct Benefit Transfer Scheme, the Aadhar number is seeded in the bank account, where the subsidy amount is transferred immediately after booking.

Current coverage

Currently, the scheme is operational in 184 districts, covering 6.57 crore LPG consumers.

Recently, the Ministry announced extending this to 291 districts covering a total of 9.22 crore LPG consumers by January 1, 2014

Suspension of the scheme has come at a time when the Supreme Court ruled that Aadhar card cannot be made mandatory to enjoy Government schemes and subsidies.

On whether DBT will be suspended for other schemes too, Information and Broadcasting Minister Manish Tiwari responded in the negative.

(This article was published on January 30, 2014)
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