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LPG Subsidy Eliminated As Oil Prices Fall

The price gap between the subsidised and non-subsidised LPG gas narrowing since early this fiscal, the Centre has not made any cash transfers into the beneficiaries' accounts for the last four months

September 3, 2020

The Centre has completely eliminated the need to provide subsidy on domestic LPG gas as oil prices fall globally.

Since September 1, the price of non-subsidised and subsidised 14.2 kg cooking gas has become identical at Rs 594 per cylinder.

This means that the government will no longer need to pay subsidy under the direct benefit transfer scheme (DBT) into the account of beneficiaries.

It may be mentioned here that with the price gap between the subsidised and non-subsidised LPG gas narrowing since early this fiscal, the Centre has not made any cash transfers into the beneficiaries' accounts for the last four months.

Thus, the government can easily make a saving of over Rs 20,000 crore in FY21 towards LPG subsidy.

It's worth mentioning here that the Centre has allocated Rs 40,915 crore as petroleum subsidy for FY21- a 6 per cent increase from Rs 38,569 crore which was allocated for the last fiscal.

"Out of this, the allocation for LPG subsidy has been increased to Rs 37,256.21 crore for the current year," reports Business Insider.

"But so far in the first quarter period, the government had to draw just about Rs 1,900 crore from the subsidy provisions," it added.

Global oil markets are largely responsible for the fall in the prices of all petroleum products.

However, oil companies also raised the price of subsidised cooking gas consistently from a Rs 494.35 per cylinder in July 2019 to the present Rs 594.

If the increase would have not taken place, then the 14.2 kg domestic LPG cylinder would have been Rs 100 cheaper.

It's worth mentioning here that there are around 27.76 crores LPG consumers in India, of whom some 1.5 crores are not eligible to get LPG subsidy since December 2016 as they have an annual taxable income above Rs 10 lakh.

This leaves some 26.12 crore consumers who were eligible to get the subsidy relief under the DBT scheme.

Out of this lot as well, with the latest developments, 18 crores are not receiving any subsidy.

The Centre is now focusing on providing relief only to the poor and a sum of Rs 9709.86 crore has been transferred into the accounts of about 8 crore such beneficiaries who are to take three free LPG cylinders during the COVID-19 pandemic.

"The good news is that with the developments in the past few months, the government had completely eliminated oil subsidy and is spending the savings on other welfare activities," further reports Business Insider.

"But this could mean that if there is any spike in LPG prices here on, the government may pass on a portion of the burden to consumers by raising LPG prices," the report added.

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