Oil companies begin pilot testing work on direct LPG subsidy.
The government is planning to cap sale of subsidised cooking gas (liquefied petroleum gas) cylinders to each household in a phased manner, while putting in a mechanism for direct transfer of subsidy to the intended beneficiaries. Consumers will have to buy cylinders above the specified quota at the market price.
The petroleum ministry has made the proposal to the task force on direct transfer of subsidies headed by Nandan Nilekani, chairman of the Unique Identification Authority of India, to trim the huge subsidy on sale of domestic LPG.
A ministry official said the three oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — have already, as a pilot project, sent letters to consumers in Hyderabad and Mysore, seeking bank account details. “We look to have a pilot till December in these two cities. Direct cash transfer of a token subsidy will be done in the pilot phase and the response will be studied,” he said. The detailed report on the functioning of the pilot shall be given to the panel by December.
The LPG pilot is being funded by the Oil Industry Development Board. Besides, the UIDAI would give Rs 50 on every enrolment. The interim report of Nilekani’s task force was given to Finance Minister Pranab Mukherjee today.
While suggesting a cap on consumption of subsidised cylinders in the first phase, the petroleum ministry has said direct transfer of subsidy to customers will be introduced in the second phase. In the third phase, beneficiaries will be identified and targeted.
“The customers will buy all cylinders at market price, while the government will fix the subsidy per cylinder. OMCs will sell LPG at the market price and the subsidy amount will be directly transferred from the government to the customers,” the report said. The OMCs currently incur a revenue loss or under-recovery of Rs 291 on every domestic LPG cylinder they sell. This under-recovery is compensated to the companies.
The quota and other rules shall be notified by the petroleum ministry. The rationing phase will have to be rolled out country-wide to prevent creating disparity across geographies, the report has pointed out.
For now, the OMCs have been mandated to set up a transparency portal that would show the details of all the customers receiving subsidised cylinders, by each distributor. The petroleum ministry has also instructed companies to recognise the UID number or Aadhars as sufficient proof of identity for giving an LPG connection.
