LPG subsidy: To give up or not?

Up to a million people have surrendered their gas subsidies. UP saw two lakh people giving it up.

Three months ago, Prime Minister Narendra Modi gave a call – #giveitup – urging the better off sections of society to forego their LPG subsidy. What the prime minister said was: “gas cylinders surrendered by you and me would be transferred to the poor who use wood for cooking”.

The crux of his appeal is that government subsidy is only for the poor and the underprivileged. For those who can afford to pay the market price, it is unscrupulous to claim it.

The prime minister used various fora for this. At the Reserve Bank of India function to mark its 80th year of formation, he urged banks and industrial houses to nudge their employees to give up the subsidised LPG. After his call, India Inc responded positively. While the Tatas  were the first to shun the LPG subsidy, industrialist Anil Ambani gave up cooking gas subsidy and called his one lakh employees to follow suit.

Others who rallied behind Modi's call include Mukesh Ambani, Anand Mahindra, Anil Agarwal, Gautam Adani, Uday Kotak and Kishore Biyani. In the southern states, celebrities came forward to give up their LPG benefits. In Karnataka, it was Wipro chief Azim Premji’s wife; in Tamil Nadu, they included actor Kamal Hasan, director Mani Ratnam. In Kerala, singer Jesudas signed up.

According to reports, up to a million subscribers have surrendered their subsidy gas. Uttar Pradesh which has the highest number of consumers, saw two lakh people giving up subsidy. That is the maximum among all states. Most of these consumers are from industrialised areas like Noida. Uttar Pradesh is followed by Maharashtra.

Among the southern states, a total of three lakh consumers have surrendered their subsidy. Karnataka has some 80,000 well-off consumers who surrendered it, followed by Tamil Nadu with 70,000 and Andhra Pradesh with 32,000.

Over 3,00,000 people, including ministers, government and public sector officials and MPs have given up subsidised LPG. In the coming months, the number is expected to go up substantially.

This, without doubt is a good augury and it seems the ‘fellow-feeling’ card of the prime minister has touched the imaginations of the well-to-do. But, it is a mere 0.7 per cent of the total number of LPG connections which have been linked to Aadhaar.

If you take an average  consumption of seven cylinders a year, that’s a total saving of a mere Rs 140 crore out of India’s projected LPG subsidy of Rs 22,000 crore for the financial year 2016.

Of course, this is not for the first time that such an appeal is made.  Some time back, the gas companies sent similar text messages to join a nation-building exercise by giving up LPG subsidy. This is the latest effort by the Modi government and oil companies to reduce the whopping LPG subsidy of Rs. 46,000 crores.  The oil companies’ target is to get 1 crore of the 15 crore LPG users in the country to willingly give up.

So, if one crore people surrender it, an equal number of poor families would get the benefit of this clean energy. The government’s intention behind the campaign is not to add to its coffers, but to provide LPG cylinders to those who want it most at concessional prices. That indeed is a bold approach.

DBT and subsidy scheme

Ever since the government started the new scheme of direct benefit transfer (DBT) for cooking gas, many have opted out of the subsidy scheme. The DBT has not only brought transparency in cooking gas subsidy but has also checked leakages in the government support programme.  

Under the DBT, the subsidy amount is directly credited into the bank accounts of consumers even as they pay full amount for LPG cylinder at the time of purchase. At present, consumers are entitled to 12 refills of 14.2 kg cylinders or 34 refills of five-kg bottles in a year at subsidised rates.

However, it is the collapse in global oil prices that is responsible for the ease in LPG pricing. But, had prices remained at last year’s levels, the picture would have been different. That said and irrespective of global prices, the bold initiative by the government needs to be taken further. Funnily, the laggards in the campaign have been the political class.

Although the appeal has been made to all MPs and MLAs, government officials and executives of public sector companies, the response has not been very enthusiastic. Reports say that not all MPs who include those from the ruling party, have given up LPG subsidy. Response of MLAs too has been poor.

While this tardy response of the political class will slowly catch up, it is the salaried middle class who work in governments that can really make a difference. Corporate employees can join the crusade to make the campaign a success.