Direct benefits transfer in LPG saved Rs 14,672 crore of subsidy last fiscal

Thanks to the implementation of the Direct Benefits Transfer in LPG (DBTL) scheme popularly known as PAHAL, the government has saved cooking gas subsidy amounting to Rs 14,672 crore last financial year. Under the scheme, rolled out across the nation in January, cooking gas subsidy is directly transferred into the beneficiary's bank account leading to plugging of leakages.

At the end of March 2015, India had 181.9 million registered LPG Consumers and 148.5 million active consumers implying a gap of 33.4 million consumers which were either duplicate or fake or inactive accounts blocked under the PAHAL Scheme and related initiatives.

"If we take into account the quota of 12 cylinders per consumer and the average LPG subsidy of Rs 336 per cylinder for the year 2014-15, estimated savings in LPG subsidy due to the blocking of 33.4 million accounts work out to Rs 14,672 crore during that year," the oil ministry said in a statement.

The statement was issued in response to recent media reports that stated the government's claim of subsidy savings from DBTL may have been inflated, based on a study by the Canada-based research body International Institute of Sustainable Development (IISD).

IISD had said the government's estimate of fiscal savings amounting to Rs 12,700 crore last financial year as a result of the roll-out of DBTL is incorrect and represents a "large overestimate". It said the fiscal savings attributable to DBTL were only Rs 143 crore and not Rs 12,700 crore as claimed by the government.

The study had cited a media report quoting Chief Economic Advisor Arvind Subramanian as saying in June savings of Rs 12,700 crore are estimated from DBT in LPG based on sales and subsidy levels for 2014-15. "In this connection, it may be mentioned that the subsidy outgo, and the consequent subsidy savings, is a result of multiplicity of factors namely the prevailing crude price, prevailing exchange rate and the tax structure across various states," the ministry said in its rejoinder.

IISD had said for seven-and-a-half months from April 1, 2014 until November 15, 2014, the scheme had no direct effect on total subsidy expenditure. DBTL only began to formally restrict access to subsidized LPG for non DBTL-registered households in mid-February 2015, and only in the 54 districts selected in Phase 1 (representing 8 per cent of total districts). It had calculated the savings by multiplying the per cylinder subsidy in the months of February and March 2015 with the number of connections restricted by DBTL (5.8 million) in the 54 districts.

The government had reintroduced DBTL in 54 districts in mid-November 2014, with nationwide roll out to all districts from January 2015. Since April 1 this year, India's cooking gas subsidies are being distributed solely by electronic transfer through DBTL. The Oil Marketing Companies' losses on LPG sales came down 22 per cent to Rs 36,000 crore last fiscal.