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LPG subsidies cut steeply in FY21, down to nil for many

The result has been a steady increase in daily costs for low-and-middle-income Indian households as global oil and gas prices recovered to, and now climb past, pre-pandemic levels. 

Published: 10th June 2021 02:59 AM  |   Last Updated: 10th June 2021 09:36 AM   |  A+A-

LPG cylinders

Representational Image. (Photo | PTI)

Express News Service

CHENNAI:  Not only have taxes on auto fuels been hiked massively over the past year, direct benefit transfers (DBT) of cooking gas subsidies have been reduced to nil for many domestic LPG subscribers not covered by the PM Ujjwala Yojana scheme.

The result has been a steady increase in daily costs for low-and-middle-income Indian households as global oil and gas prices recovered to, and now climb past, pre-pandemic levels. 

In March 2020, a 14.2-kg LPG cylinder had cost Rs 825.5 for unsubsidised customers in Chennai; those eligible received DBT subsidies of around Rs 231 per cylinder.

By May 2020, diving oil prices had pulled the price of an unsubsidised cylinder down to around Rs 600, and the government brought standard DBT LPG (DBTL) subsidies to zero—the rationale being that market prices were now at par with the previous subsidised rate. 

Now, with oil back above the $70 per barrel mark, the price of an unsubsidised cylinder has recovered to over Rs 800 again.

But since no commensurate increase has been made in DBTL rates, the price of a subsidised cylinder has climbed over Rs 800 too. 

Oil company officials who spoke on condition of anonymity say that apart from PMUY beneficiaries, DBTL subsidies have been paid only to customers in distant locations from major LPG hubs since last summer.

These transfers, made in order to account for higher freight costs, stand at only a few tens of rupees per cylinder at the most. 

The most recent data updates from the petroleum ministry’s Petroleum Planning and Analysis Cell (PPAC) show, in fact, that the basic DBTL subsidy per cylinder has remained nil since May 2020, when it had been reduced to zero from April 2020’s Rs 162.43 per cylinder.

India has around 28 crore domestic LPG customers, of which over 8 crore come under the PMUY scheme.

Starting 2015, 1.5 crore customers with annual incomes of over Rs 10 lakh lost their eligibility for subsidies. The rest of the over 18 crore currently eligible have likely been impacted by the cuts. 

Savings for government

On the other hand, the move has resulted in cost savings for the government, even considering the DBT payments made to PMUY beneficiaries under the PM Garib Kalyan Yojana (PMGKY) scheme announced last summer as a pandemic relief measure.

PMGKY scheme granted PMUY beneficiaries 3 free LPG cylinder refills last year, with the government transferring this amount directly to eligible accounts. 

In the first 11 months of FY21, PPAC data shows that DBTL subsidy payments stood at just Rs 3,559 crore far lower than the Rs 22,635 crore paid during FY20 (April 2019-March 2020).

The PMGKY component paid to PMUY beneficiaries, stands at Rs 8,162 crore as of the end of December 2020. 

Going forward, it is unlikely that DBTL payments will be increased substantially, if at all, since the budgeted allocation for petroleum subsidies for the current fiscal has been slashed to just Rs 14,073 crore, from last year’s budgeted Rs 40,915 crore.

Heavy burden: subsidies hit rock bottom

Notes:

  • Q4FY21 includes claim for January and February 2021 only.

  • The amount in Q4FY21 are net of dupicate connection deductions from total claims.   

  • PMGKY figures are upto December 2020; NA-Data not available.

Source: Petroleum Planning and Analysis Cell, Ministry of Petroleum



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