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Government to raise cap on LPG cylinders to nine

Oil Minister Veerappa Moily said the Cabinet would take the decision to raise the cap very shortly. The government had in September capped supply of subsidised LPG to six cylinders per household in a year.

Published: 11th December 2012 07:02 PM  |   Last Updated: 11th December 2012 07:58 PM   |  A+A-

By PTI

The government will raise the cap on supply of subsidised cooking gas (LPG) to nine cylinders per household in a year from current restriction of six, Oil Minister M Veerappa Moily said today.

"I think it is likely to go up definitely from six (cylinders) to 9 (cylinders)," he told reporters here.

The government had in September capped supply of subsidised LPG to six cylinders per household in a year. Any additional requirement is to be bought at market price of Rs 931 per 14.2-kg bottle.

Subsidised LPG costs Rs 410.50 per cylinder at present.

Moily said the decision to raise the cap will be taken by the Cabinet "very shortly".

The original decision to cap supply at 6 cylinders was taken by the Cabinet Committee on Political Affairs on September 13 and the decision to raise it would also have to be taken by the Cabinet panel, he said.

"I think as early as possible," he added.

Moily said he has had two rounds of discussions with Finance Minister P Chidambaram on the impact of the decision to raise the cap.

The government will have to provide an additional Rs 9,000 crore annually if the cap is raised.

"We are working on that," he said on ways to mitigate the additional subsidy requirement. "We are working on certain formula to neutralise it."

Sources said raising the cap on supply of subsidised LPG to nine cylinders per household in a year will mean that the Finance Ministry will have to provide an additional Rs 3,000 crore subsidy this fiscal.

On an annualised basis, the burden comes to Rs 9,000 crore.

Even with six-cylinder-per-household cap, oil PSUs face a unprecedented revenue loss of over Rs 163,000 crore on sale of diesel, subsidised LPG and kerosene. Of this, the finance ministry has to provide Rs 105,525 crore and it does not seem to have funds to meet even this share.

Increasing the cap would add another Rs 3,000 crore to this figure.

The remaining revenue loss on fuel sale is borne by oil firms.

Retailers currently lose Rs 10.03 per litre on diesel, Rs 30.93 a litre on kerosene and Rs 520.50 per 14.2-kg subsidised LPG cylinder.

In 2011-12, government gave out Rs 83,500 crore by way of cash subsidy.

Moily said he has discussed with Chidambaram the issue of finance ministry providing a cash support of only Rs 30,000 crore as against a demand of over Rs 55,000 crore to cover losses incurred on selling fuel below cost in the first half of current fiscal.

"I am confident they (finance ministry) will meet all the requirement," Moily added.

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