Direct govt subsidy for 1 LPG cylinder: PMO

Prime minister's office wants OMCs to bear credit subsidy for remaining 8 subsidised units on reimbursement basis

Even as the Centre is accelerating the Direct Benefits Transfer (DBT) scheme for subsidised LPG cylinders, oil marketing companies are unlikely to benefit much from it.

This is because the Prime Minister's Office has proposed that the government credit subsidy for only one cylinder into a beneficiary's account. Subsidy on the remaining quota of eight liquefied petroleum gas (LPG) cylinders would be borne by oil marketing companies (OMCs), which the government would reimburse later.

In the process, OMCs will take credit subsidy into the account of beneficiaries, but charge them the market price.

"This system will benefit them (OMCs), since the lag in the subsidy disbursement by the government will not happen," said an official. Other officials, however, conceded that giving advance for just cylinder would not serve the purpose and the government should pay upfront.

While the Cabinet is likely to make an announcement on DBT in LPG shortly, there is no clarity yet on how the system will work.

In a meeting held at the petroleum ministry, the National Payments Corporation of India (NPC) and the State Bank of India (SBI) were asked to work out the process of disbursement of money to customers' accounts.

A number of models are being mooted, such as the advance payment model under which the cash subsidy of one LPG cylinder at a time is credited to the beneficiary's bank account.

Officials said NPC would be the nodal agency for disbursement and the finance ministry would make a corpus available to it.

Currently, OMCs sell LPG at a price lower than the market rate. They wait for the finance ministry to clear the subsidy. "OMCs are unlikely to do the same by transferring money from their account to the consumers'. In that case, will the finance ministry do it directly or will there be a special corpus fund giving NPC the charge for disbursement, is something that will be decided at the Cabinet meeting," said an official.

The petroleum ministry has put forth several options, such as using the national population register (NPR) in addition to Aadhaar, for transfer of subsidy on LPG, already capped at nine cylinders in a year. The direct cash transfer on LPG and kerosene is expected to save Rs 15,000 crore on subsidy.

On Tuesday, modes of increasing the penetration of Aadhaar numbers were also discussed. "OMCs are already equipped with a data base of 140 million customers. If it is connected to Aadhaar numbers, we can kickstart the process. We are also launching massive print and audio visual campaigns to educate on seeding of bank accounts with Aadhaar," said an official.

The process will be launched in 20 districts in the first phase and by October 15, it will cover the entire country. In a recent interview to Business Standard, petroleum minister M Veerappa Moily had said those who do not have Aadhaar will be given a window of six months to enroll.

The national population registry can also be used as an alternative for some time.