LPG cash subsidy transfer: OMCs still awaiting full reimbursement

The Government still owes about ₹1,500 crore to public sector oil retailers for 2013-14 as part of the reimbursement for direct benefit transfer for domestic LPG (DBTL) launched on June 1, 2013 during the UPA regime covering 291 districts. The amount owed to Indian Oil Corporation is about ₹600 crore.

While the Petroleum Ministry is confident that the Finance Ministry will reimburse the amount, the companies are still unclear about when this will happen, as the scheme was discontinued on March 14, 2014. A modified scheme has been introduced from November 15 in 54 districts; this will be extended to the rest of the country by January 1, 2015.

“It is to be seen whether the reimbursement will figure in the supplementary demands for grants in Parliament. The reimbursement has not been separately factored into the Budget,” an industry official said.

The industry said it had been reimbursed about ₹3,800 crore for the first round.

According to Finance Ministry estimates, the modified DBT on LPG will save between ₹12,000 crore and ₹14,000 crore for the Government on subsidy outgo.

In the Budget Estimate for 2014-15, the Government has provided for ₹2,500 crore as payment for oil marketing companies (OMCs) for direct transfer of cash subsidy to the LPG scheme, and ₹1 crore toward payment for project management expenditure related to implementation of the scheme. Another argument has been that when raising the excise duty on petrol and diesel the Government had said that it was done to help the Centre raise money for deployment in welfare schemes while not burdening consumers. DBTL is being seen by many as a welfare scheme. After the launch of the modified DBTL scheme, an amount of ₹22.8 crore as permanent advance and ₹26.16 crore as cash subsidy as on November 20 has been sent to the bank accounts of LPG consumers.

When the UPA Government announced DBTL, it had made seeding of the ‘Aadhaar’ unique identity number in bank accounts mandatory before the cash transfer took place. But, after Supreme Court’s adverse comments on the subject, the Government did away with this condition.

Keeping this in mind, the Government has modified the scheme saying the subsidy will be transferred to the bank accounts, irrespective of Aadhaar seeding.

It also said the beneficiaries will get subsidy, even if they did not have a bank account, but only for up to six months. The Government hopes that the persons concerned will open a bank account during this period.