- DBT in LPG to roll out from June 1, 2013 in 20 Districts
- Registered LPG consumers to get subsidy when they book cylinders
- Three months grace period for consumers to link gas connections to Aadhaar and bank accounts
India would be taking its first big step towards the 'delivery revolution' on June 1, 2013 as we move towards a Direct Benefits Transfer (DBT) based subsidy on LPG cylinders. This would be one of the biggest reforms in the Petroleum sector in India,and perhaps the one with most far-reaching consequences.
The system would allow LPG consumers to buy the cylinders at market prices but the government would transfer the subsidy to the bank accounts of consumers at the time of booking, meaning they would not have to pay extra for the LPG cylinders.
The scheme would be launched in 20 districts spread across Andhra Pradesh, Daman and Diu, Goa, Himachal Pradesh, Karnataka, Kerala, Maharashtra, Pondicherry, Punjab and Madhya Pradesh.
According to the press note circulated by the Ministry of Petroleum and Natural Gas, the government has listed the following rules under the new subsidy schemes.
- All LPG consumers desirous of availing subsidy will have to provide the Aadhaar number to Oil Marketing Companies and also to their bank accounts for linking with their LPG consumer numbers and bank accounts respectively.
- All Aadhaar linked domestic LPG consumers will get an advance in their bank account as soon as they book the first subsidized cylinder even before delivery. This is to reduce their financial burden when they purchase the first LPG cylinder after launch of scheme at market rate.
- As soon as, the first cylinder is delivered to such consumers, subsidy eligible on date of delivery will again get credited in the bank account, which will then be available for the purchase of the next cylinder at market rate.
- Thus, subsidy eligible on each such domestic cylinder, up to the cap of 9 cylinders per year will be directly transferred to the Aadhaar enabled bank account of the consumer.
- All LPG consumers who are not Aadhaar linked will have three month grace period to link LPG consumer number and bank account with Aadhaar number and during this period they will continue to get the LPG cylinders at subsidized rate, as they are getting today, up to their entitlement.
- After the grace period, LPG cylinders will be sold to all domestic LPG consumers at market price. However, the subsidy will be transferred to only those who have linked Aadhaar in LPG database and Bank account. Others will not get any subsidy.
- After the grace period, as soon as a consumer links the Aadhaar number to bank account and in LPG database, one-time advance and subsidy transfer will re-commence as per balance entitlement.
- Consumers who do not provide Aadhaar will continue to get LPG cylinders at market price.
The DBT scheme has been brought in to curb the growing 'under-recoveries' in LPG over the last few years. The total under recovery or subsidy on LPG has almost doubled over the last three years from Rs 21,772 crore in 2010-11 to 29,997 2011-12 and hitting a high of Rs 39,558 crore in 2012-13.
While everyone agrees that there is a need to insulate the common man from the rise in international oil prices, it is equally true that some kind of reforms were needed to ensure that subsidies were targeted effectively. Studies by the Ministry indicated that a large part of the domestic cylinders were being used in the commercial sector, besides re-bottlers who were filling domestic LPG into smaller cylinders used mainly by urban migrants.
What the government is now intending to do is to ensure that the supply side constraints are removed and people seeking a LPG connection don't have to wait. On the other hand, LPG consumers would continue to get subsidy benefits through the DBT route.
A better targeting of LPG subsidy would not only make the system fiscally more efficient, it would also ensure that the common man would not feel the pinch. The only thing remaining to be seen is how soon the scheme can be implemented in the rest of the country.