It was a foregone conclusion that the Centre would raise the annual entitlement of subsidised LPG cylinders from nine to 12 per household after Congress Vice-President Rahul Gandhi’s strong pitch for it. This, despite the Petroleum Ministry’s data showing 69.5 per cent of consumers use only six cylinders or less, and 89.2 per cent up to nine in a year. The extra three cylinders would mean using ₹5000 crore of taxpayers’ money to subsidise the 10 per cent or so who can easily afford to pay the full market rate. There couldn’t be a better example of a “misdirected subsidy”, to use the Reserve Bank of India Governor Raghuram Rajan’s expression.
But the increased yearly cylinder cap — initially from six to nine and now from nine to 12 — is only one part of the story. The real problem goes beyond the LPG largesse. Much worse is the decision to dispense with the Direct Benefit Transfer for the LPG (DBTL) scheme. Under it, consumers who paid the market price of around ₹1,250 for every cylinder received a subsidy that effectively reduced their outgo to ₹415 and thereabouts. This subsidy, limited to purchases of up to nine cylinders a year, was directly transferred to their bank accounts seeded with their unique biometric-based Aadhaar identification number. What DBTL essentially sought to do was disincentivise diversion of subsidised cylinders. Why would any dealer want to do this when the consumer is paying him the full price? Secondly, a system of direct cash transfers to Aadhaar-linked accounts, coupled with a cap on subsidised cylinders, ensured the effective targeting of the subsidy. With some 17 million LPG consumers already getting subsidised through the new regime, the DBTL was to cover all 150 million connections in the next couple of years.
But this fundamental reform has received a setback with the Centre reverting to the old system of selling LPG cylinders at subsidised rates through dealers even to the 17 million consumers already under DBTL. The official reason given is that many consumers, even those with Aadhaar-seeded bank accounts, are complaining about having insufficient cash to buy cylinders at the market price and balance their other expenditure. But then a problem like this is easily overcome if the Centre is able to transfer money say, within a day of booking a cylinder. The best thing DBTL did was to make ordinary people aware of the benefits flowing from Aadhaar, which, over time, could have been extended to fertiliser and food. Unfortunately, the very party that championed Aadhaar seems bent, in what is an election year, on undermining it.