Policy

Govt may save over ₹5,000 cr in LPG subsidy

Richa Mishra Surabhi New Delhi | Updated on January 27, 2018 Published on March 05, 2017

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In the April-Dec period, the savings have been at ₹4,824 crore

The government could save between ₹5,000 crore and ₹6,000 crore in 2016-17 from direct benefit transfer of LPG subsidy.

Savings from LPG subsidy had become a bone of contention last fiscal between the Oil Ministry and the Comptroller & Auditor General of India (CAG) with the latter questioning the process of calculation.

Official data show that in the April-December period this fiscal the savings have been ₹4,824 crore.

Meanwhile, the market price (non-subsidised) of LPG has been constantly increasing since November last year. It has increased by over ₹200 from November to March. With effect from March 1, 2017, a consumer in Delhi will have to pay ₹737 for a new refill.

But, this increase does not impact the subsidised LPG, as the differential between the market price and the government determined subsidised rate is directly transferred to the beneficiaries’ accounts. The prevailing subsidised rate is ₹434 a cylinder in Delhi. Indications are that the Ministry is taking an average subsidy between ₹100-₹150 for the fiscal.

Asked if the Ministry has changed the method of calculation of savings for this fiscal, sources said that there has been no change in methodology. The CAG had based its calculations taking average LPG cylinder consumption at 6.27, according to the national average per capita consumption of LPG cylinders.

The Ministry’s calculations for 2014-15 was based on 3.34 crore consumers outside the PAHAL net multiplied by 12 cylinders multiplied ₹369.72 (average subsidy/cylinder for financial year 2014-15) equal to an estimated savings of ₹14,818.4 crore.

Following a similar principle, the savings estimated for financial year 2015-16 was ₹6,443 crore (3.56 crore x 150.82 (average subsidy) x12 cylinders) and the total for both the years works out to ₹21,261 crore.

For 2016-17 up to December 31, 2016, it is estimated that the total Direct Benefit Transfer was to the tune ₹6,661.64 crore under PAHAL, number of transactions with Aadhaar seeding was 46,55,81,590 and those without Aadhaar was 15,22,21,871.

What is interesting is that the government’s effort to pass on the benefits of subsidised LPG has also led to an increase in consumption of the cooking fuel. LPG consumption has risen by 11.47 per cent between April and January this fiscal to 17.86 million tonne (mt) from 16.02 mt in the same period last fiscal.

Published on March 05, 2017
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