Cap on subsidised LPG may be rolled back
17 September 2012
It is more than likely that some of the 'big bang' economic reforms announced by the government last week are likely to be diluted; and this seems to have already been shown in the matter of subsidised liquefied petroleum gas.
Numerous reports suggest that the union government will announce a rollback in the cap on heavily subsidised LPG, used mainly for cooking, from six cylinders a year per household to 10.
International banks and rating agencies have been sceptical of the efficacy of the reforms from the get-go, and they are proving to be right (See: Reform steps fail to impress ratings agencies). These measures have been opposed by the Trinamool Congress, the NCP the DMK, and the Samajwadi Party, apart from the BJP, the main opposition party.
Even several leaders in the Congress, which heads the union government, are demanding a rollback of the reform measures, which include a hike in diesel prices and the permission for foreign retail chains to enter the Indian market.
Kerosene prices were not even on the government's agenda – though this fuel costs about the same to produce as other oil-based fuels.
Both finance minister P Chidambaram and petroleum minister Jaipal Reddy are against the cut in fuel subsidies, but political compulsions are likely to outweigh economic necessities.
State governments could of course are largely free to take their own decisions. The Delhi government has already decided to give three subsidised LPG cylinders more than the cap in its scheme to remove all kerosene-fired stoves in the state.