LPG subsidy cap: OilMin to first target rich in 10 metros, small towns later

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“While implementing, due care may be taken that BPL consumers and urban poor should not be forced to give such a declaration and the purpose should be to target higher income sections of the society while taking such declaration through IVRS/SMS/telephone,” says the order.

Even for the 3,00,510 consumers identified by Central Board of Direct Taxes of earning Rs 10 lakh and above (at the time of arriving at the decision), the three OMCs were advised “these consumers may be approached with self-declaration form and their subsidy blocked after the form is signed”. The revised order follows inherent problems with petroleum minister Dharmendra Pradhan’s hasty decision to discontinue LPG subsidy for those earning Rs 10 lakh and above per annum.

The December 2015 order is not legally enforceable because Section 138 of the Income Tax Act forbids making public income info of any taxpayer unless it is in “public interest” or is required by “an officer, authority or body performing any functions under law relating to imposition of any tax, duty or cess, or to dealings in foreign exchange”.

Pradhan took the decision — without approval of either finance or law — to finalise the step in about a month. The proposal, initiated on November 23, was duly signed by Pradhan on December 26.

It said the ministry’s “earlier vision of nudging people to give up (subsidy) has not worked at least for high-income tax payers. It may, therefore, be considered if we take a decision to exclude this section from benefits of subsidy”.

This proposal was arrived at after a sample size of 3 lakh consumers with an income of Rs 10 lakh and above showed that only 3 per cent out of them gave up subsidy on their own accord. Pradhan approved it while directing that “Necessary amendments to the PDS Kerosene and Domestic LPG Subsidy Scheme 2002 may kindly be carried out”.

With 20.26 lakh income tax payer base earning Rs 10 lakh plus and LPG subsidy reduced to Rs 18 per kg, or Rs. 256 per cylinder, finance ministry estimates that it would not save much revenue during the remaining months of fiscal 2015-16 considering the LPG customers base of 60.35 crore.

The forthcoming elections in five states could have played upon the finance minister Arun Jaitley, said sources, as there has been all-round criticism of government not fully passing on the price reductions on petrol and diesel even though global crude oil prices have plummeted.

In its first decisive move towards curbing the supply of subsidised cooking gas, the NDA government December announced that taxpayers with an annual income of Rs 10 lakh and above would not get subsidised LPG cylinders from the New Year.

Last March, the government had asked “well-off people” to voluntarily give up using subsidised LPG and instead buy cooking fuel at market price. So far, 69 lakh people have given up the subsidy but there is “no relationship” with their income.