Subsidised LPG sales under Direct Benefit Transfer down 25 per cent, says Arvind Subramanian

Sales of subsidised LPG cylinders under the Direct Benefit Transfer (DBT) scheme have come down by about 25 per cent as most ghost beneficiaries have been eliminated, chief economic adviser (CEA) Arvind Subramanian said here on Thursday.

"Essentially, what we find is that on an average, the DBT scheme has reduced subsidised domestic LPG sales by about 25 per cent," Subramanian said at the UNDP conference call. The CEA added, "We estimate that in 2014-15, savings could be as much Rs 12,700 crore, which is a lot of money. But savings will be lower this year at around Rs 6,500 crore."

Subramanian cautioned that the government should ensure genuine beneficiaries are not excluded. Under Pahal, earlier known as DBT, LPG cylinders are sold at market rates and consumers get the subsidy directly in their bank accounts. This is done either through an Aadhaar or a bank account linkage. Subramanian admitted that the government was expecting that "commercial sales of LPG to go up by a huge number, but actually, this did not happen ... there was only six-per cent increase".

He further added that because of schemes like Pahal, Jan Dhan and Aadhaar, institutional arrangement has improved and things are working. "The DBT scheme could have been even more valuable had our tax system been a little bit more rational." The price gap between commercial sales and non-subsidised domestic sales of LPG is 32 per cent.

"A big chunk of it is taxes. The Centre imposes five-per cent Customs and eight-per cent excise duty, and states on an average impose 13 per cent tax on commercial LPG." Cautioning against extending the scheme, he said, "In the case of kerosene, a user is less literate and lives in remote areas. Last-mile connectivity problems become much more problematic."