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The Centre has earmarked ₹32,989 crore as cooking gas subsidy for the financial year 2019-2020. Of this, ₹29,500 crore is for disbursal under the Direct Benefit Transfer for liquefied petroleum gas (LPG) subsidy. Another ₹2,724 crore has been provisioned for LPG connections to poor households, and ₹674 crore is for an additional subsidy payable for the North-Eastern region.
The total subsidy amount is 62.64 per cent higher than the ₹20,283.18 crore total LPG subsidy incurred during financial year 2018-2019.
The higher budgetary allocation is based on expectations that crude oil prices will firm up. The number of LPG connections is also expected to go up.
The ‘Indian basket’ of crude oil (the average price at which Indian refiners buy crude oil) averaged $56.43 a barrel during the financial year 2017-2018. According to the Petroleum Planning and Analysis Cell, the average price of the Indian basket during the financial year 2018-2019 was $71.71 a barrel till December 2018.
Analysts have been bearish, and the price of crude is expected to rule higher, as geopolitical tensions flare up following the crisis in Venezuela and as major oil producers threaten production curbs.
Push for LPG
For kerosene, the total subsidy for the financial year 2019-2020 has been pegged at ₹4,489 crore. This is 1.45 per cent lower than the ₹4,550 crore set aside in the financial year 2018-2019.
A lower kerosene subsidy is also driven by the expected increase in the number of new LPG connections across the country this year.
Piyush Goyal, interim Finance Minister, said: “Our government embarked upon a programme to deliver eight crore free LPG connections under the Ujjwala Yojana. More than six crore connections have already been given and the remaining will get free gas connections by next year.”
But these new connections may not translate into increasing LPG consumption. Says TERI, a Delhi-based non-government organisation: “There is evidence that refill rates of cylinders are very low due to cost considerations, and many households continue to depend on biomass in spite of having LPG connections.”
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