If Mr Nandan Nilekani has his way, consumers will be able to purchase liquefied petroleum gas (LPG) cylinders straight off the shelf without even having a connection.

A Task Force, headed by the Chairman of the Unique Identification Authority of India (UIDAI), has recommended capping the number of cylinders that consumers can buy at the current highly-subsidised prices – even while emphasising that this is policy decision for the Government to take.

Once the cap is introduced, consumers would purchase all their cylinders from oil companies at the market price, with the Government fixing a per-cylinder subsidy.

This subsidy would be directly transferred from the Government to the consumers' Aadhar (Unique Identification Number)-enabled bank accounts.

But there would be a limit on the number of cylinders on which a household can claim the subsidy. If a household wishes to consume more cylinders, it would have to buy these at market rates, without any cap on the number of such non-subsidised purchases.

Interim report

Non-subsidised cylinders “can become a commodity which can be purchased without the consumer having a connection”, the Task Force on Direct Transfer of Subsidies on Kerosene, LPG and Fertiliser has said in its Interim Report submitted to the Finance Minister, Mr Pranab Mukherjee, here on Tuesday.

In the final phase, the provision of subsidised cylinders would be made available only to targeted consumers, with the others having to procure their entire requirement at the market price.

The Task Force's Interim Report is, however, less ambitious with regard to direct transfer of subsidy on fertilisers and kerosene.

For fertilisers

In the case of fertilisers, it has suggested that the subsidy be disbursed at the retailer level rather than the manufacturer or importer as is done now.

The Report has proposed June 2012 as the roll-out time for this, while conceding that reaching out to the country's estimated 2.3 lakh fertiliser retailers “will prove to be a challenge”.

Moreover, “these retailers will have varying levels of connectivity and technical prowess” and “there may be an issue of recovering subsidies (from so many retailers) in case sub-standard stocks are supplied”, it has noted.

‘Potential issues'

As for the subsequent stage of disbursing the subsidy directly to the farmer, the Task Force has admitted to ‘potential issues' arising from inaccurate land records and the prevalence of sharecropping and tenancy land tillage arrangements, which makes identification of beneficiaries difficult.

“Fixing the quantum of subsidies will further be complicated by the fact that requirements of farmers will vary vis-à-vis cropping, fertiliser usage patterns, extent of rainfall, soil conditions, landholding/size, etc.

“(And) if the subsidies will only be released after the purchase, there may be a problem of prior mobilisation of funds for buying the fertilisers,” the Report has stated.

For kerosene

For kerosene, the Task Force has mooted a two-phase implementation of the direct transfer of subsidy. In the first phase, State governments may be made to purchase kerosene from oil companies at market price from April 1, 2012.

The subsidy can, then, be transferred to the State governments, with this being linked to the actual offtake of kerosene by them.

In the second stage, the cash equivalent of subsidy would be transferred directly to the beneficiaries' bank accounts by linking the transactions to Aadhar.

The States would be required to open a ‘kerosene' account for beneficiaries with Aadhar.

The cash subsidy will again be proportional to the actual quantity of kerosene lifted by them.