LPG subsidy cap: OilMin to first target rich in 10 metros, small towns later

With 20.26 lakh income tax payers earning Rs 10 lakh plus and LPG subsidy reduced to Rs 18 per kg, FinMin estimates that it would not save much revenue during rest of FY16

Written by Amitabh Ranjan | Updated: February 12, 2016 2:15 am
LPG, LPG subsidy, LPG subsidy cap, LPG cylinder subsidy, cooking gas, cooking gas subsidy, cooking gas subsidy cap, india news, latest news This proposal was arrived at after a sample size of 3 lakh consumers with an income of Rs 10 lakh and above showed that only 3 per cent out of them gave up subsidy on their own accord. (Source: Express archive)

The rich in Ludhiana and Kolhapur need not worry about losing their LPG subsidy for the petroleum ministry has decided to initially target 10 metropolitan cities.

Petroleum ministry last week directed state-run oil marketing companies (OMCs) to insert “suitable question in the automated interactive voice response/SMS platforms for ascertaining the income status of the consumers” as well as during phone calls for refills. It directed that the above exercise be “initially operationalised in top metropolitan cities like Delhi-NCR, Mumbai, Chennai, Bengaluru, Hyderabad, Pune, Kolkata, Ahmadabad, Lucknow and Chandigarh” and an action take report be submitted by mid-month for further decision.

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“While implementing, due care may be taken that BPL consumers and urban poor should not be forced to give such a declaration and the purpose should be to target higher income sections of the society while taking such declaration through IVRS/SMS/telephone,” says the order.

Even for the 3,00,510 consumers identified by Central Board of Direct Taxes of earning Rs 10 lakh and above (at the time of arriving at the decision), the three OMCs were advised “these consumers may be approached with self-declaration form and their subsidy blocked after the form is signed”. The revised order follows inherent problems with petroleum minister Dharmendra Pradhan’s hasty decision to discontinue LPG subsidy for those earning Rs 10 lakh and above per annum.

The December 2015 order is not legally enforceable because Section 138 of the Income Tax Act forbids making public income info of any taxpayer unless it is in “public interest” or is required by “an officer, authority or body performing any functions under law relating to imposition of any tax, duty or cess, or to dealings in foreign exchange”.

Pradhan took the decision — without approval of either finance or law — to finalise the step in about a month. The proposal, initiated on November 23, was duly signed by Pradhan on December 26.

It said the ministry’s “earlier vision of nudging people to give up (subsidy) has not worked at least for high-income tax payers. It may, therefore, be considered if we take a decision to exclude this section from benefits of subsidy”.

This proposal was arrived at after a sample size of 3 lakh consumers with an income of Rs 10 lakh and above showed that only 3 per cent out of them gave up subsidy on their own accord. Pradhan approved it while directing that “Necessary amendments to the PDS Kerosene and Domestic LPG Subsidy Scheme 2002 may kindly be carried out”.

With 20.26 lakh income tax payer base earning Rs 10 lakh plus and LPG subsidy reduced to Rs 18 per kg, or Rs. 256 per cylinder, finance ministry estimates that it would not save much revenue during the remaining months of fiscal 2015-16 considering the LPG customers base of 60.35 crore.

The forthcoming elections in five states could have played upon the finance minister Arun Jaitley, said sources, as there has been all-round criticism of government not fully passing on the price reductions on petrol and diesel even though global crude oil prices have plummeted.

In its first decisive move towards curbing the supply of subsidised cooking gas, the NDA government December announced that taxpayers with an annual income of Rs 10 lakh and above would not get subsidised LPG cylinders from the New Year.

Last March, the government had asked “well-off people” to voluntarily give up using subsidised LPG and instead buy cooking fuel at market price. So far, 69 lakh people have given up the subsidy but there is “no relationship” with their income.

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  1. Haradhan Mandal
    Feb 12, 2016 at 11:28 am
    It is unbelievable that there are only "20.26 lakh income tax payers earning Rs 10 lakh plus" (uming all earning above TEN Lakh also use gas for cooking and get it from GOVT PSU). We are 100 Crore people. 20.26 lakh makes only 0.20% of the total potion earns GROSS 10 Lakh per year. Isn't better that Govt pay attention to who are not paying TAX - first? rather than on saving subsidy? sometimes in the past in an article in IE, it was said 80% of the tax comes from the taxpayers whoa re in the bracket below 10 Lakh?
    1. Arun Kottur
      Feb 12, 2016 at 12:37 pm
      also link the same with the crude prices at international levle
      1. A
        Feb 12, 2016 at 9:16 am
        ok agreed you take away the subsidy from these people. at the same time can you make sure the LPG dealer delivers without any problem that is no extra charge, no postponing the delivery. make it like i can go and pickup the cylinder by paying the same amount any time from any place or dealer.
        1. A
          Arun Sharma
          Feb 12, 2016 at 6:46 am
          Wherever piped to LNG is available for domestic use, discontinue giving cooking gas to house holds and force them to take piped LNG connection which is not subsidized. Now such piped gas is available mostly in localities where household income is gt; ten lac. I have witnessed that people are not taking LNG connections because they feel that LPF is cheaper.
          1. R
            Feb 12, 2016 at 10:10 am
            Subsidies should be revoked for all but the genuinely poor. These stupid subsidies bleed the treasury and reduce the budget for spending on infra and other important needs to grow the economy. Leftists always use subsidy schemes to get as many votes as possible. As the LPG subsidy scheme, currently stands even Ambani and the CEOs of the largest corporations can receive subsidy. This is how these left-wing s widen the deficit and plunge us into debt.
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