Kerosene subsidy bill builds up 21% to Rs 5,800 cr in FY19; LPG jumps 49.4%

The next government at the Centre would have around Rs 13,300 crore left in its petroleum subsidy provisioning for the current financial year — 2019-20, or FY20 — as 2018-19 closed with a Rs 37,000-crore requirement.

The kerosene subsidy provision for 2019-20 has been subsumed entirely by the requirement last year. In fact, the government would have to provide Rs 1,311 crore more for last year when a full Budget is presented in June.

The subsidy bill on liquefied petroleum gas (LPG) for FY19 saw a 49.4 per cent increase, to Rs 31,200 crore compared to Rs 20,880 crore in FY18. The kerosene subsidy bill last year saw a 21 per cent increase, from Rs 4,785 crore in FY18 to Rs 5,800 crore.

The rise in subsidy burden on LPG was because of an increase in consumption and a rise in international prices during the period.

The subsidy estimate for LPG for FY20 is expected to be Rs 35,880 crore, and Rs 2,730 crore for kerosene. The government had provisioned Rs 32,989 crore for LPG and Rs 4,489 crore for kerosene in the February 1 interim Budget to meet the requirement of both the years.

The three oil marketing companies — Indian Oil Corporation (IOC), Bharat Petroleum Corporation, and Hindustan Petroleum Corporation (HPCL) — have together added 45.5 million customers by the end of March 31. Of this, 36.3 million come under the Pradhan Mantri Ujjwala Yojana (PMUY) scheme, through which cooking gas connections are allotted to poor families.

In contrast, kerosene subsidy had remained under control because those getting LPG connections and power were no more entitled to kerosene given through the public distribution system.

Based on the latest data available with the Petroleum Planning and Analysis Cell (PPAC), the LPG consumption recorded a growth of 10.2 per cent during March 2019 and a cumulative growth of 6.8 per cent during FY19. Under the flagship Ujjwala Yojana, the government has added 71.9 million connections since the launch of the scheme on May 1, 2016.

During March 2019, of the five regions, north had the highest share in LPG consumption of 33.3 per cent followed by south at 26.8 per cent, west at 22 per cent, east at 15.4 per cent and northeast at 2.6 per cent.

Interestingly, the cumulative reduction in kerosene allocation was 11.7 per cent in FY19 compared to the previous financial year. Kerosene consumption registered a growth of 2.8 per cent during March 2019 and cumulative degrowth of 10.1 per cent during FY19.

In 2017-18, India became the second largest consumer of LPG in the world by taking 22.5 million tonne (mt). According to the government estimates, this is likely to increase to around 30.3 mt by 2025 and 40.6 mt by 2040.

For 2019-20, the PPAC has estimated the country's import bill to be around $112.72 billion, as against $111.95 billion during FY19. This is despite imports from Iran coming to "zero" in May, after the US lifted waivers to India on Tehran sanctions.

The imports were estimated at the average price of Indian basket crude oil at $66 a barrel and average exchange rate for Rs 71 per dollar. In terms of quantity, the crude oil imports for FY20 is expected to go up 233 mt compared to 226.6 mt in FY19.