The number of people availing of subsidy on liquefied petroleum gas (LPG) cylinders is set to fall. And, the mode of this subsidy would also shift — to a direct subsidy mechanism — sooner than expected.
If the finance ministry has its way, consumers may have to pay market prices for LPG cylinders from early next year, or after the Budget, with the subsidy reimbursed to customers directly. In the next phase, the government would start targeting only particular sections to which this facility would be extended.
According to the officials in the know, this LPG subsidy framework would be implemented in a manner suggested by a task force headed by Unique Identification Authority of India (UIDAI) Chairman Nandan Nilekani.
They added with the capping of subsidised cylinders, the first phase was complete, and work on the next phase would start next year. On September 13, the government had limited the number of subsidised cylinders per consumer to six a year. Against the subsidised price of Rs 410.43 per cylinder in Delhi, the market-linked price is Rs 894.
To ensure a smooth transition from the current regime to the new LPG subsidy regime, the Nilekani-led task force had suggested three-phased implantation. In the first phase, it had recommended capping the number of subsidised cylinders for all customers. The government has already implemented this.
In the next phase, the government would target direct transfer of subsidy to customers. One option to implement this is through the Aadhaar platform, which UIDAI officials say could be developed in three months with the help of oil marketing companies
In the third and final phase, the government would identify segmented customer groups that can avail of the direct subsidy on LPG cylinders.
Officials say this is the most critical phase, adding a decision on the implantation of the phases would depend on economic and political considerations.
They, however, add as things stand now, it is certain all consumers cannot avail of subsidised cylinders from next year. However, considering Lok Sabha elections are due in 2014, the timing of the move would be crucial.