Public sector oil marketing companies have started to reap benefits from the ‘Give it up’ campaign for LPG subsidy.
According to conservative estimates, IndianOil, Bharat Petroleum and Hindustan Petroleum have collectively raked in nearly ₹1,280 crore in the last financial year (2017-18) alone.
Extra revenue
This additional revenue can be directly attributed to the 1.04 crore consumers that had voluntarily started buying domestic LPG cylinders at market price by May 1, 2017.
An IndianOil official said, “On an average 7.1 domestic LPG cylinders are consumed annually by urban households and four cylinders every year by rural homes. The gains for oil companies are on the higher end as most of those who forfeited the subsidy fall under the urban category.”
The ‘give it up’ campaign was launched on March 27, 2015 to encourage voluntary forfeiture of LPG subsidy by well-to-do consumers.
Subsidy stats
According to the Petroleum Planning & Analysis Cell, the government oil marketing companies bore an average subsidy of ₹173.41 for every 14.2 kg domestic LPG cylinder sold in the country.
“There has not been a noticeable change in consumption patterns and 1 crore of these consumers had opted out of the subsidy during the 2016-17 fiscal itself,” another IndianOil official said. The average LPG subsidy during financial year 2016-17 was at ₹108.78 per cylinder.
This comes to an additional revenue of nearly ₹803.23 crore for the three public sector oil companies.
But, this does not mean that there will be significant gains in the bottom-line for these companies as they will be offset by a rise in the number of subsidised connections.
Rise in LPG connections
According to the Petroleum Planning and Analysis Cell, there were 21.86 crore active LPG connections in the country as on January 1, 2018.
This has risen steadily from 14.86 crore active consumers in 2015.
Most of the new connections are driven by the Pradhan Mantri Ujjwala Yojana, the Centre’s flagship scheme that provides free LPG connections.
Under the scheme, the amount to be paid while getting a new connection is waived off.
But, it is recovered by the oil company from the subsidy allocation for each cylinder purchased under the connection.
Behaviourial change
While consumers were happy to receive the connections, they were unable to purchase the LPG cylinders at market price due to costs.
Sensing discontent, the three government companies decided to extend the subsidy to these consumers too and deferred the loan recovery for six refills from April 1.
Responding to a query on whether the waiver will be extended, a Petroleum Ministry official said, “The waiver was implemented to bring about a behavioural change. This has happened and there may be no need to extend it.”