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Banish those thoughts of LPG subsidy ending in the near term
In the Union Budget for 2023-24, finance minister Nirmala Sitharaman has kept the budget estimate (BE) for petroleum subsidy – primarily subsidy on liquefied petroleum gas (LPG) for household consumption – for 2023-24 at a mere Rs 22.57 billion. The subsidy on the purchase of a product is a financial assistance given by the state to persons who cannot afford to pay the market-based or cost-plus price. Subsidy on LPG is the excess of its cost of supply over the price paid by the beneficiary. The cost of supply is refinery-gate price, freight, marketing costs, marketing margin, dealers’ commission and taxes and duties.
At present, 96 million poor households who have been provided free gas connection under the Pradhan Mantri Ujjwala Yojana (PMUY) during the last eight years or so are eligible to receive subsidy at the rate of Rs 200 per cylinder (14.2 kg) for 12 fills. The three major oil marketing PSUs – Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) – deliver the LPG cylinder to eligible beneficiaries at full cost-based price and follow it up by depositing subsidy in their account and claim reimbursement from the government of India (GoI).
Small Outlay
With the subsidy at Rs 200 per cylinder, the annual outgo on 12 fills in a year per beneficiary comes to Rs 2,400. For 96 million PMUY beneficiaries, the subsidy requirement will be Rs 230/40 billion. It may well be, the fills taken by the beneficiary are less; for instance, beneficiaries took four fills on an average during 2021-22. Even on this basis, the subsidy requirement would be Rs 76.80 billion annually. Against this, the Budget for 2023-24 has provided only Rs 22.57 billion.
In June 2020, the LPG subsidy was stopped. That was due to the fortuitous circumstance of a steep decline in international prices (due to the COVID-19 pandemic) leading to a fall in price to Rs 600 a cylinder even on a cost-plus basis; hence subsidy support wasn’t required. The expenditure of Rs 360 billion under this head during 2020-21 was used largely to clear past dues of oil PSUs and provide free gas connections under PMUY.
(Source: Moneycontrol)
Congress promises LPG below Rs 500
March 3, 2023: Rahul Gandhi on Wednesday said the Narendra Modi government had slashed subsidies for essential items like cooking gas — whose price has been raised again — but had handed over precious national assets to his friends.
The Congress announced that it would provide LPG cylinders for less than Rs 500 if it came to power at the Centre.
On a day the government raised the price of domestic cooking gas cylinders by Rs 50 and commercial cylinders by Rs 350, Rahul tweeted in Hindi: “Price of an LPG cylinder in 2014 during Congress rule was Rs 410 and the subsidy given was Rs 827. Under the BJP in 2023 the price is Rs 1,103 and the subsidy given is 0. In Congress Kaal, the subsidy gave relief to the people, while in Mitr Kaal people’s pockets are being picked and the nation’s assets have been handed to the ‘friend’ as a gift.”
Congress president Mallikarjun Kharge also attacked the Modi government for the crushing pre-Holi blow to the poor and asked for how long this firman (edict) of loot would continue.
Party spokesperson Gourav Vallabh said: “The Congress governments in Himachal Pradesh and Rajasthan have started providing LPG cylinders for Rs 500. We will replicate this scheme at the national level. The cooking gas cylinder will not cost more than Rs 500 if the Congress comes to power in 2024.”
Alleging that Modi’s governance doctrine rested on crony capitalism, Vallabh said: “Milk price increased by Rs 8 a litre in 2022. Atta costs 40 per cent more in one year, vegetables are already out of reach of the poor. Clothes and other edible items are also costlier. Unemployment is at its peak…. If you ask uncomfortable questions, the Enforcement Directorate, CBI, income tax department and the police will chase you.”
Vallabh pointed to the latest GDP growth rate of 4.4 per cent and said: “No growth, no jobs, essential items are being unaffordable, but we are told it is Amrit Kaal and have to thank Modi ji for this.”
Vallabh said the government had confessed that the GDP growth had slowed because manufacturing had registered negative growth and private consumption had decreased. He said private consumption was down because people didn’t have money in hand.
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