NEW DELHI: The oil ministry has decided to shelve plans to cap the number of subsidised cooking gas cylinders
for each household at four, a move that would have pushed up the annual
kitchen bill by at least Rs 1,100-Rs 1,300 at current market rates -
assuming a consumption pattern of 8-9 refills a year.
State-run gas suppliers sell a refill for approximately Rs 400 in Delhi. This is Rs 260 short of the current market price and is partly subsidised by the government and its oil producers. According to the proposal, consumers would have had to pay market price -- which rises with crude or the rupee-dollar exchange rate just like petrol -- for extra cylinders.
As first reported by TOI on July 9, the ministry had drawn up the proposal with a view to pruning the subsidy burden and ensuring government dole reached only the deserving. It was estimated that the cap on cheaper cylinders would have saved at least Rs 12,000 crore, or the size of mop-up expected from the deferred follow-on public offer in flagship explorer ONGC.
Official sources said the plan had been shelved for now. The decision indicates the government's aversion to opening a new front over fuel pricing reforms, given that it is hemmed in by criticism from within the ruling coalition and the opposition alike on the issue of foreign direct investment in multi-brand retail.
It is also an indicator to the government's strategy of not antagonising alliance partner Mamata Banerjee further when it needs her support on the issue of FDI in retail, being touted as a key to cranking up the economy.
The West Bengal chief minister had threatened to pull out of the UPA alliance when state-run oil marketers on November 3 raised the price of petrol, even though the government does not control the fuel. While the government stuck to its guns, it had to promise that fuel prices would henceforth be left untouched.
The government's desire to avoid a political showdown over fuels was also evident from finance minister Pranab Mukherjee seeking Parliament's approval to pay Rs 30,000 crore in fuel subsidy for the first half of the fiscal to state-run oil marketers.
He placed supplementary demands, the second this year, for grants of Rs 56,848 crore, more than half of which was for compensating oil marketers for selling diesel, cooking gas and kerosene at artificially low prices set by the government.
The three state-marketers lost Rs 64,900 crore in the April-September period. The government will make up less than half of this through cash subsidy after Parliament approves the supplementary demands for grants. Oil producers have already paid Rs 21,633 crore to make up for one-third of the fuel marketing revenue loss. The remaining Rs 13,267 crore would have to be absorbed by the three retailers.
The ministry had proposed to limit the number of subsidized cylinders for even BPL (below poverty line) families at four cylinders a year. But the government would have given them a one-time assistance of Rs 1,400 for getting a connection.
Anyone who owned a car, two-wheeler and house or figured in the income tax list would have had to pay full price for a refill. The subsidy to BPL cardholders would have been delivered through the unique identification number, Aadhar, as it is commonly known.
The plan was being rationalised on the ground that the present system did not differentiate between the needy and those who could afford to pay market price. It said even billionaires got their fuel at subsidized rates in the present system.
The ministry reckoned four cylinders would be enough to take care of the cooking needs of a BPL family. The ministry's view was based on studies which indicated that most of the kerosene consumed by BPL families was used for lighting purposes and wood or cow dung cakes remained the choice of fuel for cooking.
The Centre at present supplies 9-10 million tonnes of subsidized kerosene a year for selling to poor through ration shops controlled by state governments. Several government and independent studies have said nearly 40% of the fuel is diverted for adulteration of motor fuels, giving rise to a black market worth over Rs 16,000 crore at today's market price.
State-run gas suppliers sell a refill for approximately Rs 400 in Delhi. This is Rs 260 short of the current market price and is partly subsidised by the government and its oil producers. According to the proposal, consumers would have had to pay market price -- which rises with crude or the rupee-dollar exchange rate just like petrol -- for extra cylinders.
As first reported by TOI on July 9, the ministry had drawn up the proposal with a view to pruning the subsidy burden and ensuring government dole reached only the deserving. It was estimated that the cap on cheaper cylinders would have saved at least Rs 12,000 crore, or the size of mop-up expected from the deferred follow-on public offer in flagship explorer ONGC.
Official sources said the plan had been shelved for now. The decision indicates the government's aversion to opening a new front over fuel pricing reforms, given that it is hemmed in by criticism from within the ruling coalition and the opposition alike on the issue of foreign direct investment in multi-brand retail.
It is also an indicator to the government's strategy of not antagonising alliance partner Mamata Banerjee further when it needs her support on the issue of FDI in retail, being touted as a key to cranking up the economy.
The West Bengal chief minister had threatened to pull out of the UPA alliance when state-run oil marketers on November 3 raised the price of petrol, even though the government does not control the fuel. While the government stuck to its guns, it had to promise that fuel prices would henceforth be left untouched.
The government's desire to avoid a political showdown over fuels was also evident from finance minister Pranab Mukherjee seeking Parliament's approval to pay Rs 30,000 crore in fuel subsidy for the first half of the fiscal to state-run oil marketers.
He placed supplementary demands, the second this year, for grants of Rs 56,848 crore, more than half of which was for compensating oil marketers for selling diesel, cooking gas and kerosene at artificially low prices set by the government.
The three state-marketers lost Rs 64,900 crore in the April-September period. The government will make up less than half of this through cash subsidy after Parliament approves the supplementary demands for grants. Oil producers have already paid Rs 21,633 crore to make up for one-third of the fuel marketing revenue loss. The remaining Rs 13,267 crore would have to be absorbed by the three retailers.
The ministry had proposed to limit the number of subsidized cylinders for even BPL (below poverty line) families at four cylinders a year. But the government would have given them a one-time assistance of Rs 1,400 for getting a connection.
Anyone who owned a car, two-wheeler and house or figured in the income tax list would have had to pay full price for a refill. The subsidy to BPL cardholders would have been delivered through the unique identification number, Aadhar, as it is commonly known.
The plan was being rationalised on the ground that the present system did not differentiate between the needy and those who could afford to pay market price. It said even billionaires got their fuel at subsidized rates in the present system.
The ministry reckoned four cylinders would be enough to take care of the cooking needs of a BPL family. The ministry's view was based on studies which indicated that most of the kerosene consumed by BPL families was used for lighting purposes and wood or cow dung cakes remained the choice of fuel for cooking.
The Centre at present supplies 9-10 million tonnes of subsidized kerosene a year for selling to poor through ration shops controlled by state governments. Several government and independent studies have said nearly 40% of the fuel is diverted for adulteration of motor fuels, giving rise to a black market worth over Rs 16,000 crore at today's market price.
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