Wednesday, May 16, 2012

LPG subsidy to be withdrawn

The central government will phase out subsidies for LPG. To begin with, the government will first withdraw all LPG cylinder subsidy to members of Parliament, state Legislative Assemblies, and all gazette officers.

In the second phase, subsidies to families earning at least Rs50,000 a month will be withdrawn. They will now have to pay full price for LPG cylinder. Additionally, MPs and MLAs and Class-I government officers will be allowed to buy 19 kilogramme cylinders at full price, which is currently about Rs1200.

The two-stage move is expected to save an estimated Rs 5,000 crore in LPG subsidies. In 2011-12, the subsidy on LPG is estimated to be about Rs.25,000 crore.

 Rs 5000 crore cut will not make much of  a dent in the Rs5.13 trillion deficit -- about 5.1 per cent of GDP -- projected for fiscal 2012-13.Govt will use the unique national identity card project, known as Aadhaar, to implement the partial deregulation process.

There are about 12.5 crore domestic LPG connections in the country. Finance Ministry calculations show that each household uses an average of 8 cylinders annually.

Currently, state-owned oil marketing companies report under-recoveries of Rs 480.50 per cylinder of LPG. The central government offers an additional Rs22.58 subsidy on each cylinder.

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