Thanks to the fall in global oil prices, the Narendra Modi government has reduced the provision for subsidising domestic cooking gas by 17%.
“The government had decided to provide a fixed subsidy of Rs 18 per kg under direct benefit transfer for domestic LPG during April-October, which has been revised to Rs 15 per kg November 2015 onwards,” a senior petroleum ministry official told FE.
The budgetary support for PDS kerosene, however, remains at Rs 12/litre.
In order to offer clarity on subsidy sharing mechanism to both upstream (ONGC, Oil India and GAIL) and oil marketing companies (IOC, BPCL and HPCL), the government has put in place a fixed budgetary provisioning model for domestic LPG and kerosene. However, the actual subsidy turned out to be lower than the budgeted provision, letting the government create a pool account to keep the additional funds.
The average subsidy on domestic LPG got reduced by about 63% to Rs 11.08/kg in FY16 against Rs 29.63/kg in FY15. This made the government revise the provision for LPG subsidy downwards by Rs 3/kg. The benchmark Brent crude oil price fell nearly 44% to an average of $48.73/barrel in FY16 against $86.6/barrel in FY15.
“The pool account had savings of around Rs 8,000-9,000 crore by October-November 2015, which was utilised to clear the advances to OMCs. Now, the balance in pool account is about Rs 800-900 crore,” another government official said.
Not just the fall in global commodity prices, but the Modi government has successfully brought down the subsidy on domestic cooking gas by also relaunching UPA’s flagship programme of direct bank transfer of subsidy which was discontinued by the previous government. At the same time, more than one crore consumers have voluntarily given up their cooking gas subsidy.
The direct benefit transfer on LPG, which has been recognised by the Guinness Book of World Records as the largest cash transfer programme in the world, has helped to save about Rs 15,000 crore by stopping black marketing and diversions, Prime Minister Narendra Modi had said in his address from the ramparts of the Red Fort on August 15, 2015.
On April 25 this year, petroleum minister Dharmendra Pradhan informed the Lok Sabha that the government has decided to rationalise the subsidy outgo by excluding such LPG consumers from the purview of subsidy whose or whose spouse have taxable income of Rs 10 lakh and above during the previous financial year computed as per the Income Tax Act, 1961, with effect from January 1.
