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Subsidy transfer next in LPG reforms

Scheme to start on May 15, will be launched from Mysore and 19 more districts

Shine Jacob & Jyoti Mukul  |  New Delhi 

Despite the lack of a clear road map, the United Progressive Alliance (UPA) government is likely to start using the Direct Benefits Transfer (DBT) scheme for disbursal of subsidy on cooking gas from May 15. The Ministry of Petroleum and Natural Gas has put forth several options, such as using the national population register (NPR) in addition to Aadhaar, for transfer of subsidy on liquefied petroleum gas (LPG), already capped at nine cylinders in a year.

A political call will be taken at a Cabinet meeting next week, after which a big-bang announcement is expected. The programme will be launched from Mysore and 19 more districts.

A senior government official told Business Standard the options include starting with cash transfer into bank accounts in areas where there is 40 per cent penetration of number and then gradually increasing the coverage to 80 per cent.

Wherever seeding of bank accounts with has not happened, the government will continue with the present system of giving subsidised LPG cylinder to consumers directly. The petroleum ministry has proposed an advance payment model through which cash subsidy of one cylinder at a time is credited into the bank account of beneficiary.

"Whenever the booking is made, the money will be directly debited from the account of beneficiary to that of oil marketing company," explained the government official, who did not want to be quoted.

Petroleum Minister told Business Standard that in addition to aadhaar, would also be used for directly crediting subsidy for nine cylinders into the accounts of beneficiaries. Delivery men will not have any role in terms of getting numbers or facilitating transfer of subsidy.

Since the penetration level of bank accounts seeded aadhaar numbers is low, there is still no clarity on the issue. The major problem is the linking of Aadhaar and bank accounts. The three ministries are talking and they will decide within a week. "Some people who do not have aadhaar or have the number but are not linked to banks accounts would not be covered under the scheme. A six-month window will be given to them," said the official. If a consumer has already got five cylinders till then, the balance amount will be refunded in the remaining six months.

Implementation of DBT in domestic cooking gas is the easiest since the cylinders are distributed through a well-established system of dealers, monitored by three government-controlled companies. "Since other schemes where DBT is being tried out are much smaller in scaled, DBT in LPG will have a much bigger the impact," said the official.

The direct cash transfer on LPG and kerosene is expected to save Rs 15,000 crore on subsidy. In the case of kerosene, which is distributed through the Public Distribution System controlled by the state government, a pilot scheme is being implemented at Kotkasim block in Alwar district of Rajasthan. It was able to plug 80 per cent of leakage in the PDS by blocking fake users.

DBT will be the next major reform in LPG after the government decided to cap the number of subsidised cylinders to nine in a year. Prior to that, Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum Corporation had carried out a de-duplication drive, which restricted a LPG connection to one for a single kitchen at a residence. Besides, know-your-customer norms were also introduced, along with a transparency portal that plugged diversion of domestic LPG cylinders for commercial purposes.

  • Rs 29,148 cr
    Total underrecovery on LPG sale (April-December)
  • Rs 434.5
    Underrecovery on sale of each cylinder

What's cooking?
  • Govt can pay this directly to bank accounts linked to Aadhaar
  • Those who do not have Aadhaar would be given a six-month window to get the card
  • Advance of one cylinder would be transferred to an account at a time

First Published: Fri, April 12 2013. 00:50 IST