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News updated at 2:34 AM IST

Govt raises LPG cap to nine a year

New Delhi, Dec 11, 2012, DHNS 2:53 IST

EC objects, calls it poll code violation

File Photo
After dithering for over two months, the government on Tuesday announced that it would increase the cap on subsidised LPG cylinder to nine from the present six in a year. But it did not give any timeline for the proposal.

The announcement, however, elicited an immediate reaction from the Election Commission which directed the government to stop it forthwith.

The move for reported increase in supply of subsidised gas cylinders, if any, must be stopped forthwith, under confirmation to the commission," the commission directed the Petroleum Ministry in a letter after taking suo motu cognisance of the matter.

The government, however, appears determined to raise the cap. "I think it is likely to go up definitely from six to nine cylinders," Petroleum Minister M Veerappa Moily said. He also
said the proposal will get the Cabinet nod shortly.

The assurance from Moily came apparently after he achieved some success on taking the Finance Ministry on board for bailing out the oil marketing companies, which will have to shell out an additional Rs 9,000 crore per year if the cap goes up by three more cylinders.
“We are working on some formula to neutralise it (the effect of subsidy burden),” the minister told reporters. Moily had two rounds of talks with Finance Minister P
Chidambaram on the subsidy.

Asked when the Union Cabinet is expected to take a decision on the issue, Moily quipped, "I think as early as possible".

Although the petroleum minister has hinted at raising the cap on subsidised domestic cooking gas cylinders on several occasions in the past, the move never got an approval by the Finance Ministry, which is struggling to stitch together a gaping hole in Centre’s fiscal deficit.

The government in September capped the supply of subsidised LPG to six cylinders per household a year. As per the ruling, any extra cylinder was to be procured on market price, which is more than double the cost of subsidised refill.

The oil marketing companies are currently losing Rs 520 over each 14.2 kg subsidised LPG cylinders. Their under recovery has gone above Rs 1,63,000 crore on the sale of diesel, kerosene and subsidised LPG. The rise in cap is expected to increase the subsidy even further. The government has provided a subsidy of Rs 105,525 crore this year, but this is far short of their requirement.

The government has also made it mandatory for multiple LPG cylinder holders to fill up their Know Your Customer form by end of this month, failing which their subsidised cylinder quota will be converted into non-subsidised one.

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