Rs 15,000 crore has been saved on LPG subsidy

“The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.”
Atish Sreemany, EMBA 2015-18, Vinod Gupta School of Management, IIT Kharagpur

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While addressing the nation on its 69th Independence Day, Prime Minister Norendra Modi said  “We corrected the system and Rs 15,000 crore, which was stolen every year in the name of gas subsidy, has been saved” . LPG subsidy payout from the Union Budget in 2014-15 was Rs 40,591 crore against a Rs 52,231 crore in 2013-14, a saving of Rs 11,640 crore.

This move has many dimensions:

  • This has been achieved since the government started transferring cooking gas subsidy directly into consumers’ accounts. It is direct cash benefit transfer to consumers. Since the launch of the scheme, now named PAHAL, domestic LPG all over the country is sold at market price. Households get cash subsidy in their bank accounts to make good the difference between old subsidised rates and the market price.
  • It took advantage of bank accounts opened under Jan Dhan Scheme and Aadhaar numbers to give subsidy straight to consumers. It also enables consumers or at least one bank account per family.
  • The move helped to stop black-marketing of subsidised cooking gas. The amount was stolen every year in the name of gas subsidy and by implementing the process it has been corrected.
  • This process cuts diversion to segments such as restaurants and other commercial establishments enabling the subsidy to the right segment
  • Around 20 lakh people have also voluntarily given up LPG subsidy. Middle class families and teachers are among the people who have left subsidy; the savings amount to about Rs 320 crore.

This step increased awareness of LPG subsidy which was enjoyed by consumers earlier as well but was not well acknowledged, it is a direct tangible benefit to Indian population. ‘Give it up’ campaign helps to widen the reach of fuel. It is a lesson to government on subsidiary issues which is much debated topics over the years, same process can be followed for different segments.

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