Economic Survey: Govt needs to reduce subsidised cylinders to 10

Advocating rationalising LPG subsidy, the pre-Budget Economic Survey has called for cutting supply of below-market priced cooking gas to 10 cylinders per household in a year from 12 bottles, at present.

At present, all households are entitled to get 12 cylinders of LPG or liquefied petroleum gas, each with 14.2kg, at a subsidised rate of Rs 419.26, against the current market price of Rs 575.


Any requirement above the entitlement of 12 bottles has to be bought at the market price.

"Rationalisation of LPG subsidy is essential. It may be useful to cap subsidy to 10 LPG cylinders for each household (that being the maximum used for usual domestic cooking)," the survey tabled in Parliament said.

The previous Congress-led UPA government had restricted the number of subsidised domestic cylinders per household to six every year in September 2012, revising it to nine the following January.

The cap was revised in January 2014 to 12 cylinders a year, starting April 1 that year.

The survey also called for "aligning taxes and duties on domestic and commercial LPG users."

Currently, there is no excise duty on a 14.2-kg of subsidised LPG cylinder, but a similar sized non-domestic bottle attracts 8 per cent levy.

Besides, while a subsidised domestic cylinder is exempt from customs duty, a 5 per cent import duty is levied on non-domestic LPG cylinder.

LPG is sold in different pack sizes - 5 kg, 14.2 kg and 19 kg. A household customer is allowed 12 cylinders of 14.2-kg each or 34 cylinders of 5 kg each during a year at subsidised rates.

The subsidised LPG cylinders are exempt from excise as well as customs duty but not the other categories including 19-kg commercial cylinders.

This anomaly has led to diversion or black-marketing of subsidised cylinders for other uses.

Earlier, the government had asked well-off people to give up using subsidised LPG and instead buy cooking fuel at market price. So far, over 65 lakh consumers, out of a total of around 15 crore, have responded to this GiveItUp campaign.

The subsidy payout on LPG in 2014-15 was Rs 40,551 crore, which this fiscal will be less than half as petroleum prices have slumped to a six-year low. During April-December, the subsidy outgo was Rs 12,092 crore.