LPG subsidy transfer: Centre’s savings not more than Rs 143 cr, while it claims Rs 12,700 cr

The NDA initially reintroduced DBT for LPG in 54 districts in mid-November 2014, with nationwide roll out to all districts from January 2015.

Written by Udit Misra | New Delhi | Updated: October 7, 2015 10:31 am
lpg The NDA initially reintroduced DBT for LPG in 54 districts in mid-November 2014.

A study by the International Institute for Sustainable Development (IISD) states that the government’s claims of savings due to a shift towards direct benefit transfer (DBT) for LPG (also called PAHAL) are “large overestimates”. IISD has shown that as against the publicly touted figure of Rs12,700 crore of savings for the financial year 2014-15, the actual savings cannot exceed Rs 143 crore, or just 1.12 per cent of the claimed number.

“Our calculations suggest that the savings from DBTL in the last fiscal year are likely to be large overestimates. It is important that precise savings figures are presented by the government so that an accurate appraisal of DBTL as a policy can be made. This is especially important as DBT is now being considered as a way to deliver kerosene and food subsidies,” said Kieran Clarke, one of the three co-authors of the study, who is based in Geneva.

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Since there is no official document that provides a clear estimates of the savings made by the shift, IISD chose the Rs12,700 crore number because it was being repeatedly attributed, by a direct quote, to chief economic adviser Arvind Subramanian. The Indian Express has reviewed several news stories in Indian media that back up IISD’s claim. These include reports in The Indian Express as well. For instance, a news story that was published on July 3 in The Indian Express carried the following quote: “Based on sales and subsidy levels for 2014-15, savings of Rs 12,700 crore are estimated from DBT in LPG,” said Arvind Subramanian, chief economic adviser to the finance ministry on Thursday at a UNDP conference, adding that savings this fiscal are estimated at Rs 6,500 crore due to the lower crude oil prices.’

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However, when contacted, Subramanian directed this writer to a New York Times article that he had written alongside Siddharth George, who is an economist in the Ministry of Finance. However, later, in an emailed reply, in which Subramanian was also copied, George clarified that Rs 12,700 crore was not the savings for 2014-15. “The Rs 12,700 crore figure does not pertain to FY14-15 … We obviously do not know exactly how much absolute consumption will be this year — that depends on market prices and other factors. But we can say that based on last year’s total consumption, the savings would have been 24 per cent of total consumption or about 12,700 crore,” he said.

The NDA initially reintroduced DBT for LPG in 54 districts in mid-November 2014, with nationwide roll out to all districts from January 2015. The UPA government had first introduced the programme, and later suspended it in February 2014.

Since April 1, 2015, India’s cooking gas subsidies are being distributed solely by electronic transfer through DBTL. IISD states that it is the largest unconditional cash transfer programme in history.

Under the DBTL, which has replaced the direct sale of cooking gas cylinders at subsidised prices, households place an order for LPG with their gas distributor, receive an amount equivalent to the current subsidy amount via electronic transfer to their bank account, then pay the full unsubsidised price for the cylinder in cash on collection or delivery.

IISD study states that “assuming programme implementation on the basis formally announced, the theoretical maximum reduction in subsidy expenditure directly attributable to DBTL in FY 2014-15 can therefore be roughly calculated by applying the initial reduction in subsidised consumption (reported as 25 per cent) to the total potential consumption available to existing connections (reported as 23.3 million), then applying the relevant data on monthly under-recoveries and fiscal subsidy to calculate the estimated ‘avoided’ expenditure figure.”

According to IISD, households possessing LPG connections were given three months from the initial introduction of the scheme in their district to register their bank account details for direct payment, during which time they were still able to purchase subsidised cylinders within their quota. Following this period, households, could purchase only non-subsidised domestic cylinders. However for a further period of three months the equivalent per cylinder subsidy would be recorded and released to the consumer upon DBTL registration.

It is important to note that for a period of seven and a half months — from April 1, 2014 to November 15, 2014 — the scheme had no direct effect on total subsidy expenditure. “DBTL only began to formally restrict access to subsidised LPG for non DBTL-registered households in mid-February 2015, and then only in the 54 districts selected in Phase 1 (representing 8 per cent of total districts). In the remaining Phase 2 districts (constituting 92 per cent of total districts), non-registered households retained formal access to directly subsidised LPG until March 31st 2015.”

Reetika Khera, professor at IIT Delhi, is not surprised to hear that government could have been overstating the savings. “There has been no serious analysis of the benefits and cost of the UID project. Three recent studies suggest that the government has been overstating the benefits and hiding costs (in terms of disruption).”

On October 2, a study commissioned by the Andhra Pradesh government, conducted by the Society for Social Audit, Accountability and Transparency (SSAAT) found that over half of those who did not lift their rations in May 2015 reported reasons related to the use of Aadhaar: either fingerprint recognition failed, Aadhaar numbers mismatched or there was a malfunction in the E-PoS machine. IISD’s Clarke agrees with the claims that DBTL has done little to enhance access of LPG for poor and vulnerable consumers. “It (DBTL) also doesn’t tackle the significant administrative hurdles faced by the poor to gaining registered LPG connections, and therefore LPG subsidies.”

The massive anomaly in government’s claims comes to light just as Supreme Court is scheduled to decide on the use of UID for PDS on October 7.

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  1. R
    Raje
    Oct 7, 2015 at 2:00 pm
    Writer is trying his best....but unfortunately he should understand that figure is for w nation and based on total consumption done last year. So why I writer in such a hurry to show things are wrong? Come on pappu writer, grow up and write something sensible.. We all readers should understand that all media houses such as TOI, I-E, Hindu are sold out to one and only one family... They will spend all resources, freedom, RTI and everything to show that only family suits India, BJP and others do not. We need to understand this negative propaa carried out by unfortunate bikau Indian journalists
    Reply
    1. A
      Aramaan
      Oct 7, 2015 at 12:09 pm
      Figures for 54 districts taken for calculation for entire country?
      Reply
      1. A
        Anantha Rao
        Oct 7, 2015 at 5:19 pm
        Aadhar was introduce to control citizens but people were falsely told about "benefits" when there no such benefits. Many people have posted videos on faking finger prints. Thus people benefits will be taken by corrupts without actual presence of person and dead people will continue in Aadhar system. It looks like corruption will take place at faster rate than before !!
        Reply
        1. S
          Sachin
          Oct 7, 2015 at 10:47 am
          Total BJP Members over 100 Millions*161.81=16181 Millions.Their own supporters did not give up the subsidy and preaching to others to give up the Subsidy.Pehle Apna Aangan saaf Rakho Phir Gaon Ka.
          Reply
          1. C
            costlyTruth
            Oct 7, 2015 at 11:02 am
            This study is completely wrong. The main savings in the PAHAL scheme comes from weeding out of illegal connections and already 33 million excess illegal connections have been eliminated and that savings itself would be more than 8000 crores. see this link. You can be anit-modi or anti-BJP, but of late this has turned out to be anti-India. it is really funny to see this survey, which is talking about avoided expense? what is that? govt is going to give that subsidy anyhow. poor chaps.
            Reply
            1. V
              Vinit D
              Oct 8, 2015 at 12:24 pm
              PM Modi said in his Independence day address that 20 lakh people have given up subsidy. 20Lakh x 12 cylindersper family= 2.4 cr cylinders. I do not understand how they claim to have saved Rs12,700 crores.
              Reply
              1. S
                Sagittarius Sengupta
                Oct 8, 2015 at 10:50 am
                In another case Arun Shourie commented that Government's Rs.2 Lakh Crore Coal Mine Auction Claim 'Misleading'
                Reply
                1. K
                  kiran
                  Oct 7, 2015 at 11:29 pm
                  I am amazed at lengths these pres ti tutes go to prove Modi wrong. But ultimately they get a nice tight slap. When the article itself carries clarification, I am amazed how can they write such cheap sensational headlines to create impression of lies from PM. The Article itself contains the clarification "However, later, in an emailed reply, in which Subramanian was also copied, George clarified that Rs 12,700 crore was not the savings for 2014-15. “The Rs 12,700 crore figure does not pertain to FY14-15 … We obviously do not know exactly how much absolute consumption will be this year — that depends on market prices and other factors. But we can say that based on last year’s total consumption, the savings would have been 24 per cent of total consumption or about 12,700 crore,” When did Central govt claim that 12700 crore was 2014-15 savings ? Whichever article I searched, they have just claimed that yearly savings will be 12700 crores.
                  Reply
                  1. M
                    M.Srinivasan
                    Oct 7, 2015 at 9:52 am
                    I make two suggestions forthe reading elites innational interest. One, to renametheHIndu as the Islam and the two, The Indian Express as Anti IndianExpress. In ancient India, that is during my school and coege days these papers used to have patrioticfervouor in their writings, atude and emotions that were in sync withose the people of the couontry. Their managements have not only sold their finaancial worth but also their patriotic feervour. M.Srinivasan
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                    1. M
                      Mohan Ranade
                      Oct 8, 2015 at 12:42 am
                      It seems Indian express is trying to influence the Supreme Court.
                      Reply
                      1. K
                        kumar
                        Oct 7, 2015 at 4:55 pm
                        According to Ministry sources the basis for the 13,000 to 15,000 crores figure for savings is as follows: Over 3 crore consumers have been blocked as a result of de-duplication/dormancy under the PAHAL scheme after a long window to register themselves. The average subsidy granted from April 14 to July 15 comes out to be Rs 425/cylinder . Rs 425 for a cylinder for 12 cylinders for 3 crore consumers comes out to be close to 15,500 crore. The big picture in terms of Aadhaar linkage and those not availing subsidy is as follows: As of the beginning of this month there were close to 8 crore consumers availing LPG subsidy who had linked their Aadhaar for direct transfer Over 3 million consumers having given up their subsidy while nearly 2 core consumers are overall buying non-subsidized LPG The total subsidy transferred to date from the beginning of the pilot in 2013 is in the range of 26,000 crores It is that 3 crore figure which can also be seen as curbing of leakages and stopping of domestic cylinders being diverted for commercial purposes that is underlying the LPG Subsidy Savings figure on account of direct transfer of benefits using Aadhaar. With merely another 5 crore minority registered consumers who want to avail subsidy but have not yet linked their Aaadhaar, the reality is that the vast majority of consumers have either registered their Aadhaar or have opted to not avail of any subsidy.
                        Reply
                        1. K
                          kumar
                          Oct 7, 2015 at 4:54 pm
                          Reply
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                            Ramudu
                            Oct 7, 2015 at 9:03 pm
                            Why one has to give up subsidy?. There is no benefit by giving up subsidy. There is no priority delivery. The account will still be blocked if there is no consumption for 6 months. When govt is saving subsidy money and precious lpg - non renewable resource by people who consume less, why they still keep the old rule consuming minimum 1 cylinder in 180 days must.
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                              APUPADHYAY
                              Oct 7, 2015 at 12:45 pm
                              The subsidy on Gss reaches the Halwaee, small cylander retailers.
                              Reply
                              1. X
                                xyz
                                Oct 8, 2015 at 12:06 am
                                This govt is a Feku govt. It claims one thing in public and when question retracts in private. You claim in public that you saved 12000 cr and in a private email say that is not so. This is not new. Remember how it was claimed that He saved 60,000 people in Uttranchal floods and when questioned said no. Remember how it was claimed on TV by two central ministers that they are giving J&K 6000 cr and when questioned days later the actual figure was less than 200 Cr. Remember how He claimed that he will give 1000 cr to Vizag when in reality was it was zero. Feku govt.
                                Reply
                                1. X
                                  xyz
                                  Oct 7, 2015 at 11:47 pm
                                  Yes. The Indian Express and The Hindu still do not believe that every Indian has already received Rs 15 Lakhs in his bank account.
                                  Reply
                                  1. S
                                    Sushanta Kumar
                                    Oct 7, 2015 at 11:34 am
                                    The study has missed out on so many other facts related to ensuring LPG connections to mes. Few facts which the study missed out are: a) Checking on Illegal connections: as a reader has pointed out the scheme has eliminated almost 33 million illegal connection which is a direct benefit of Rs 8000 Crores of Subsidy. b) Loss of Revenue from Non-Domestic LPG: most LPG connections illegally taken were being used for commercial purposes which again lead to loss of revenue.
                                    Reply
                                    1. S
                                      Sushanta Kumar
                                      Oct 7, 2015 at 11:37 am
                                      a detailed "research" and "cooking" up numbers is different ball game altogether.
                                      Reply
                                      1. V
                                        vishwanath
                                        Oct 7, 2015 at 9:05 pm
                                        I tend to agree with Sushanta Kumar.
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                                        1. T
                                          TR
                                          Oct 9, 2015 at 1:04 pm
                                          The savings are calculating by capturing various paramaters e.g 1) No of non subsidised refills sold, 2) No. of multiple/bogus connections blocked or converted into non subsidised connection 3) Reduction of demand of domestic subsidised LPG despite release of New connections on account of genuine users only getting the benefit that too directly into the account Apart from that the details of all the people who have surrendered their LPG subsidy is available on the indivisual Oil companies website under the "Scroll of Honour" Details of bebefeciary (BPL family) who got Deposit Free LPG connection for each of them surrendering their LPG subsidy is also available for any one to check.
                                          Reply
                                          1. T
                                            TR
                                            Oct 9, 2015 at 1:09 pm
                                            the period has now been revised to 365 days.
                                            Reply
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