Claims on saving through LPG subsidy cuts ‘misleading’

20 Jul 2016


A report from the Comptroller and Auditor General of India (CAG) would seem to punch a hole in the union government's claim that it would end up saving almost Rs22,000 crore in the financial years 2014-15 and 2015-16 after launching its two-pronged approach on cooking gas subsidy.

According to a report in The Hindu, a CAG audit report to be tabled in parliament during the ongoing monsoon session has found that the saving from people voluntarily giving up LPG subsidy or opting for direct bank transfers adds up to less than Rs2,000 crore. The remaining saving is actually owing to the dramatic fall in the prices of LPG that is imported annually.

During the two years, global crude oil prices declined 65 per cent from about $106 a barrel to around $36.

DBT or PAHAL (Pratyaksh Hanstantrit Labh) is designed to ensure that the benefit meant for genuine domestic customer reaches them directly and is not diverted.

In order to avail of the LPG subsidy consumers need to register their mobile number with the distributor and also link their bank account with their Aadhaar number.

The government began paying subsidy directly into bank accounts of cooking gas consumers in select districts from November 2014 and in the rest of the country from 1 January 2015.

Through the GiveItUp campaign, the government urged the well-to-do consumers to not avail of the subsidy.

In May, petroleum minister Dharmendra Pradhan had claimed that the government has saved over Rs21,000 crore in cooking gas LPG subsidy in the last two financial years as direct benefit transfer (DBT) helped eliminate duplicate connections as well as diversions.

As on 1 April 2015, there were 18.19 crore registered LPG consumers but only 14.85 crore active consumers, implying that 3.34 crore consumers were duplicate, fake or inactive accounts.

"Eliminating such 3.34 crore consumers helped save Rs14,672 crore in 2014-15 fiscal (year ending March 31, 2015)," Pradhan had said.

The minister had said the savings in 2015-16 was about Rs7,000 crore, lower than the previous fiscal mainly because of the fall in global oil prices, thereby cutting the subsidy required.

"An average of Rs 366 per cylinder subsidy was considered for 2014-15 fiscal," he said. "If we take into account the quota of 12 cylinders per consumer and the average LPG subsidy of Rs336 per cylinder for the year 2014-15, estimated savings in LPG subsidy due to the blocking of 3.34 crore accounts works out to Rs14,672 crore, during that year," the minister said explaining the rationale behind the calculation.

However, this is not the first time that the savings from these programmes have come under the scanner.

In October 2015, a study by Kieran Clarke and Shruti Sharma of the International Institute for Sustainable Development (IISD) had found that the actual savings of the government in 2014-15 could have been only Rs143 crore or just 1.12 per cent of the government's claim of Rs12,700 crore savings.

"Regardless of the potential impact of introducing DBTL on total subsidised LPG consumption, it would be very difficult for the scheme to have delivered significant savings in total subsidy expenditure in FY 2014-15, as the vast majority of connected households retained formal access to subsidised LPG under the previous subsidy distribution mechanism," they said in an article on The Wire.

Taking a cue from the claimed success of the programme, the government is now planning to extend the DBT scheme to kerosene (DBTK).

Pradhan had said the scheme will start roll out in June or July on a pilot basis and depending on its success extended to rest of the country.

Liquefied Petroleum Gas and kerosene are the only two subsidised fuel remaining with petrol being market-priced from June 2010 and diesel from October 2014.

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