Populist gesture

The government’s decision to raise the cap on subsidised LPG cylinders from nine to 12 for a household per year seems aimed at wooing voters.  

With general elections just a few months away, the UPA is trying every populist trick in the book to impress the voters. Although the Congress denies it, the government bowed to pressure from the party. The subsidy is not economically prudent especially at a time when the government is talking of cost cuts. The new largesse will cost the government an additional Rs 5,000 crore annually. Subsidies are welcome, even necessary if they reduce the economic hardships of India’s poor. But raising the cap on LPG cylinders will not benefit the poor, the bulk of whom live in rural India. It is well known that just a little over 15 per cent of rural households use LPG.

Besides, nine gas cylinders per year are sufficient for the average Indian household. Those who need more have the capacity to pay the market rate for additional cylinders. The government’s draining of the exchequer to pamper this section is not only unnecessary but it is bad economics. At best this is an electoral gimmick and a poorly thought out one. A few extra gas cylinders at subsidized rates are unlikely to wipe out years of bad governance, inflation and corruption in the eyes of the voter. 

The government has done well to put on hold the cash transfer of LPG subsidy to Aadhar-linked bank accounts. No doubt, this decision deals a crippling blow to the government’s Direct Benefits Transfer scheme as the subsidy on cooking gas accounted for a whopping 82 per cent of the total amount transferred under the scheme. It is a major setback for a scheme that the government had often trumpeted as a ‘game-changer for the aam admi.’

However, the decision to put the scheme on hold became inevitable. Many people are yet to register themselves in the Aadhar scheme. Others do not have a bank account. Then there are those who have Aadhar cards and bank accounts but have not been able to link the two for various reasons. In the circumstances, millions across the country – mainly the poor - were staring at the possibility of losing the LPG subsidy. They would have had to pay the market price. With the government suspending the linking of LPG subsidy to Aadhar-linked bank accounts, they can now breathe a sigh of relief.

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