Union Oil Minister Dharmendra Pradhan’s two years in office through May 2016 would be remembered for the clamp down on corporate influence in the working of the ministry, significant reduction in petroleum subsidies even if it was a result of the historic 60 per cent decline in crude prices during this period, diesel decontrol and roll-out of populist schemes such as Ujjwala that aimed to provide heavily subsidised cooking gas connections to the poor.
Pradhan began with targeting the core issue ailing the sector — massive leakage in liquefied petroleum gas (LPG) subsidy — through rolling out the direct benefit transfer in LPG (DBTL) scheme in 52 districts from November 2014 and the rest of the country in January 2015.
The result: the government has managed to successfully weed out more than 33 million fake or duplicate connections leading to savings of Rs 21,672 crore in the two financial years.
“Under Pradhan, the petroleum ministry also announced three bold steps — freeing up diesel prices from administrative control in October 2014, launching the world’s largest cash transfer programme in DBTL and introducing the ambitious Ujjwala scheme for providing clean cooking fuel to the poorest of the poor,” said Debasish Mishra, a partner at Deloitte Touche Tohmatsu India.
The domestic gas prices are now linked to international benchmarks and are revised every six months to capture changing trends in the global market.
Also Read
“Also, the way the gas price issue has been resolved for output from difficult fields augurs well for the economy. It has opened up the possibility of huge investments over the next three to four years for producing 35 million standard cubic metre per day reserves,” Mishra said.
The Prime Minister Narendra Modi-led government also moved quickly to realise a major source of controversies that have historically plagued the sector was policy imperfection. The Union Cabinet, therefore, announced major big bang reforms for the sector in March announcing a new regime for auctioning of blocks moving away from the cost-recovery based New Exploration Licensing Policy (NELP) to revenue share-based Hydrocarbon Exploration Licensing Policy (HELP) that is considered more investor friendly.
Experts point out another major achievement of the government lies in getting more than 10 million consumers to give up their LPG subsidy through the GiveitUp campaign where users were asked to voluntarily surrender subsidy. The scheme alone has led to savings of Rs 5,000 crore on fuel subsidy. Further, the oil ministry has now rolled out Ujjwala scheme under which more than 50 million new LPG connections would be given to women from BPL households over three years at a cost of Rs 8,000 crore.
The Oil Marketing Companies’ total LPG under-recoveries came down from Rs 36,500 crore in 2014-15 to Rs 16,000 crore in 2015-16. “The 60 per cent reduction in the subsidy was on account of the decline in crude oil prices and the implementation of DBTL. The government has increased the active consumer base of LPG by 37 million in the past two years as against 130 million in the first 60 years since independence,” Pradhan had said earlier this month at an event.
With the oil ministry determined to fully eradicate unwanted subsidies, a new scheme of rolling out direct cash transfer for providing Kerosene subsidies has been rolled out. Under the Direct Benefit Transfer in kerosene (DBTK) scheme, consumers across 33 districts in nine states would be able to receive Kerosene subsidy allocation directly in their bank accounts leading to plugging of leakages.
Despite these initiatives, Pradhan’s two years at the ministry are not without their share of criticism. The Modi government may have announced bringing down India’s import dependence for energy by 10 per cent through 2022, the country’s crude oil production has stagnated at 37 million tonne over the past two years. Experts, however, blame it on the older policy in the UPA regime and the lack of bidding since 2009. Also, the government is criticized for not passing on the entire benefit of the reduction in crude prices to consumers through frequent revisions in excise duty. Pradhan responds by asserting excise duty hike is meant to fund infrastructure creation like rural roads and a large part of the gain is transferred to the states.
