Millennium Post

Cash transfer scheme for LPG to save `10,000-crore subsidy

After effecting big bang reforms of deregulating diesel prices and raising natural gas rates, Oil Minister Dharmendra Pradhan on Monday said the relaunched cash transfer scheme for LPG
will help save Rs 10,000 crore in subsidy. The Cabinet on Saturday decided to re-launch what it said was a modified version of the Direct Benefit Transfer Scheme of the previous UPA government.

Under the scheme, cash subsidy is paid into bank accounts of LPG users so that they can buy the cooking gas refill at market price. Pradhan said the DBT will help check diversion of subsidised cooking gas to unintended users as also bring efficiencies in the system.

'It is a way to reduce subsidy (burden)... Rs 10,000 crore in LPG subsidy can be saved,' he said, adding that the scheme will be launched on full-scale by the last quarter of current fiscal.

The projected subsidy savings are on an annualised basis. Last fiscal, Rs 46,458 crore out of a total subsidy burden of Rs 138,869 crore was on account of LPG.

Pradhan said the decision to deregulate diesel, which resulted in retail rates being cut for the first time since January 2009, was a 'well thought out decision which was taken after considering all aspects.'

'My primary concern is how to protect the interest of consumers... the decision has been tailor made to do so,' he said. 'The government will not interfere in pricing on a day-to-day basis.'

Petrol price was deregulated or freed from government control in June 2010 and since then it has moved in tandem with cost. This has resulted in five reductions in rates in line with falling global trend since August. Cumulatively, rates have been slashed by almost Rs 7 a litre in two-and-a-half-months.

On kerosene subsidy, he said kerosene is consumed by a different class of people and the same model for subsidy reduction on diesel or LPG cannot be applied there. The NDA government priority, he said, was to put the economy back on track and the decisions taken on Saturday were part of the same. On the 46 per cent increase in gas price to $5.61 per million British thermal unit, he said the government has come out with a 'progressive and affordable pricing regime.'

'We had two primary concerns — looking at purchasing capability of consumers as well as to ensure that investments come in. I must say we have been able to strike a balance,' he said.

The new price, which will be effective from 1 November, will be affordable to power and fertiliser
consumers while also spurring investments in oil and gas exploration.
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