Govt mulling options to lower income cut-off level for LPG subsidy

The finance ministry has asked the oil ministry about its suggestions regarding rationalising the scheme
With petroleum subsidies expected to touch a four-year high of more than Rs 37,000 crore in 2018-19, the government is mulling options to rationalise the scheme by excluding those with an annual income of more than Rs 5 lakh from getting cooking gas subsidy. 

The current limit — excluding those with an annual income of more than Rs 10 lakh from having liquefied petroleum gas (LPG) subsidy — is in place since 2016. This is one of the many options on which the finance and petroleum ministries are deliberating in a bid to bring down LPG subsidies. 

The two ministries are considering bringing down the number of cylinders per annum from 12 to seven or eight. The Centre is also examining the option denying subsidies for those who own cars. For this, the government has collected registration details of cars from regional transport offices (RTO) in a few districts. 

A decision on bringing down LPG subsidies is likely to be one of the first steps the new government will have to take a call on after the Lok Sabha elections. 

The Ministry of Finance has sought opinion from the Ministry of Petroleum and other stakeholders on whether the income limit can be reduced, Business Standard has learnt from multiple sources close to the development.

“The finance ministry has asked the oil ministry about its suggestions regarding rationalising the scheme. This includes a possible reduction in the cap based on annual income. This will be one of the first calls the new government will have to take as LPG subsidy is going up,” said a government official.

According to internal estimates drawn up in February, the expected petroleum subsidy figure for 2018-19 was about Rs 37,002 crore — including Rs 31,169 crore on liquefied petroleum gas and Rs 5,853 crore for kerosene, respectively. This was compared to a cooking gas subsidy of Rs 16,056 crore in 2015-16, Rs 12,133 crore in 2016-17, and Rs 20,956 crore in 2017-18, causing concern for the Indian economy.

Apart from rising international prices, the recent increase in LPG penetration was also instrumental in the increase. From a mere 148 million LPG consumers in India on March 31, 2015, the number has increased by around 77 per cent to 261.6 million now. This is primarily due to the Pradhan Mantri Ujjwala Yojana (PMUY), through which the government added 71.1 million LPG consumers.

The government’s subsidy bill per cylinder has grown over the years. The subsidy per cylinder was seen at Rs 108.78 in 2016-17, Rs 173.41 in 2017-18, and Rs 219.12 during the first half of 2018-19. In March this was seen at Rs 205.89, up from Rs 165.47 a cylinder in February.

The existing limit of Rs 10 lakh came after eliminating 40.9 million fake connections through Direct Benefit Transfer for LPG (DBTL), through which the government has saved nearly Rs 56,391 crore of cooking gas subsidy. This is 47 per cent of the cumulative savings of Rs 1,20,469 crore the Centre has so far got through direct benefit transfer.

As reported earlier, the Modi government held back outstanding petroleum subsidy dues to pay for PM KISAN. That is why there is an assumed rollover of Rs 13,000 crore included in the petroleum subsidy budgeted estimate of Rs 37,478 crore for 2019-20.

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