Consumers will have to pay the full market rate ? R750 at current prices ? for every LPG cylinder from April 2013 as the government gears up to directly transfer the subsidy on this fuel to consumers? accounts starting next fiscal.
LPG users will get the subsidy on six cylinders in their bank accounts thanks to the unique identity (Aadhar) number that each consumer will be given.
Going by the differential between the cost price and selling price of LPG cylinders over the last couple of years, the annual subsidy payment by the government for each consumer could be around R1,800. Later, however, the subsidy will be restricted to the identified low-income families.
Last week, the government capped the number of subsidised LPG cylinders to each household at six, in its effort to rein in the runaway fiscal deficit.
The government is budgeted to spend R1,758 crore this fiscal to provide unique identity numbers to 400 million people.
While the Unique Identification Authority of India (UIDAI) is preparing the framework for cash transfer of subsidy, oil retailers are now focusing on getting rid of unlawful beneficiaries of subsidy.
A senior executive from an oil marketing company told FE that the company has identified several lakhs of multiple connections and have already sent notices to holders of those connections. In many cases, connections have been withdrawn, the official said.
?We have also taken away LPG connections of those who use piped natural gas. The process is getting implemented in a structured manner,? said an oil marketing company official who did not wish to be named.
The plan is to ration six subsidised LPG refills a year initially, followed by direct transfer of cash subsidy by linking the LPG connections to the Aadhar number and, thereafter, limiting cash transfers only to the poor.
The issue of black marketing and multiple gas connections was earlier raised by Nandan Nilekani, the UIDAI chairman.
The R396 per cylinder differential between the price of a domestic LPG cylinder and those available for commercial use often leads to subsidised fuel getting diverted to unintended users.
According to government estimates, around 29% of customers purchase four refills or less, 38% of customers use five refills or less and 44% of consumes avail of six refills or less in a year.
At present, there are around 140 million domestic LPG customers. About 12 million customers were added in 2011-12, indicating a growth of around 10%.
Despite the bold steps taken by the UPA government of increasing the price of diesel and capping LPG cylinders to six per household, its impact on reducing the government?s fiscal burden is likely to be minimal.
The decision to reduce under-recovery by R20,300 crore will translate into only a 0.2% cut in the fiscal deficit, much lower than desirable, officials said.
