Govt cuts LPG dole link with Aadhaar, raises cylinder cap

The government on Thursday put in abeyance its ambitious project for transfer of cooking gas subsidy directly into the bank accounts of beneficiaries. The Cabinet Committee on Political Affairs also increased the cap on subsidised domestic gas cylinders from nine per household in a year to 12.

Halting the direct transfer of cooking gas subsidy could possibly be the biggest economic reform casualty in the wake of populism ahead of the general elections. The Direct Benefits Transfer on liquefied petroleum gas (DBTL) was put on hold citing ground-level implementation issues.

DBTL already covers 291 of the 640 districts in India, with 107 added only this month. According to the latest government statistics, 17 million consumers have been covered under the project, with transactions amounting to Rs 3,000 crore.

Petroleum Minister M Veerappa Moily said a committee would be set up to review DBTL’s execution; the Aadhaar-linked scheme would be put on hold till the report was given. “We want to make it fool-proof.” He said the move did not mean “the government’s reform process is put on the back burner”.

Capping of the gas cylinders and the DBTL scheme were considered significant reforms undertaken under the second term of the United Progressive Alliance government. The increase in cap will add another Rs 5,000 crore to the burgeoning subsidy burden on petroleum products, expected to be Rs 141,000 crore this financial year.

The cap on cooking gas cylinders was increased from six to nine in January 2013.

Debasish Mishra, senior director of Deloitte India, said: “It’s a political decision.” But the government “should have kept the DBTL scheme rolling”, even if it had to increase the cap on LPG from nine to 12. “Against the Budgetary allocation of Rs 70,000 crore, the subsidy was expected to cross Rs 1,40,000 crore this financial year,” he added.

During the briefing, Moily conceded the government would have saved Rs 12,000-14,000 crore if DBT was fully implemented. However, there were “lots of problems,” due to the unavailability of Aadhaar, or its linkage with bank accounts, and issues pertaining to advance payment of subsidy. Even consumers who were already getting the subsidy under the new platform would revert to the old mechanism.

The DBT scheme, pegged to be a major poll plank and considered a “game-changer”, was launched in January last year. Though DBT in cooking gas was rolled out only in June and scaled up gradually, it already constitutes between 80 per cent and 90 per cent of the total payments under DBT.

The Supreme Court had recently passed a judgment that no one should suffer due to Aadhaar being made mandatory for availing government welfare services. The Centre, along with oil marketing companies, had requested for a review of the order.

On if the review of DBTL was in view of the Supreme Court observation, I&B Minister Manish Tewari said it would be inappropriate to comment on a sub-judice matter. “This decision is a standalone one and this decision of review is only confined to LPG… As far as other schemes are concerned, there have been no complaints or very minimal complaints with regard to implementation.”

According to the decision, consumers will get one subsidised cylinder each in February and March, taking the number of subsidised cylinders this financial year to 11. From April, the government will provide subsidy on 12 cylinders. However, there is confusion on whether the subsidised cylinders have been capped to one each month, which might create problems for consumers.

The increase in cap of cylinders will mean that LPG will be available at a subsidised rate for 97 per cent of its total consumer base of 140 million.