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Govt to raise cap on subsidised LPG cylinders to 9 per year

Last Updated: Wednesday, December 12, 2012 - 09:19

New Delhi: The government will increase the number of subsidised cooking gas (LPG) cylinders a household can avail in a year to nine from current six, Oil Minister M Veerappa Moily said Tuesday.

Wary of political backlash of the decision to limit supply of subsidised LPG to just six cylinders per household annually, Moily has convinced Finance Minister P Chidambaram of the need to modify the September decision to cap the supply of subsidised cooking cylinders.

"I think it is likely to go up, definitely from six (cylinders) to nine (cylinders)," Moily told reporters here.

As per the September 13 decision, every household could avail of six LPG cylinders of 14.2-kg at subsidised rate of Rs 410.50 per bottle. Any requirement beyond will cost the market rate of of Rs 931 per cylinder.

Only 44 percent of households in the country consume six cylinders in a year, while the majority consumed 9-12 bottles.

Moily said the decision to raise the cap will be taken by the Cabinet "very shortly".

The original decision to cap supply at 6 cylinders was taken by the Cabinet Committee on Political Affairs on September 13 and the decision to raise it would also have to be taken by the Cabinet panel, he said.

"I think as early as possible," he added.

Moily said he has had two rounds of discussions with Finance Minister P Chidambaram on the impact of the decision to raise the cap.

The government will have to provide an additional Rs 9,000 crore annually if the cap is raised to nine cylinders.

"We are working on that," he said on ways to mitigate the additional subsidy requirement. "We are working on certain formula to neutralise it."

Asked if the government will wait for elections in Gujarat to get over before raising the cap, he said: "No."

"Even if we announce it now... It will not affect state elections as normally that state will be excluded (from implementation of the decision)," Moily said.

Sources said raising the cap on supply of subsidised LPG to nine cylinders per household in a year will mean that the Finance Ministry will have to provide an additional Rs 3,000 crore subsidy this fiscal.

On an annualised basis, the burden comes to Rs 9,000 crore.

Even with six-cylinder-per-household cap, oil PSUs face a unprecedented revenue loss of over Rs 163,000 crore on sale of diesel, subsidised LPG and kerosene. Of this, the finance ministry has to provide Rs 105,525 crore and it does not seem to have funds to meet even this share.

Increasing the cap would add another Rs 3,000 crore to this figure.

The remaining revenue loss on fuel sale is borne by oil firms.

Retailers currently lose Rs 10.03 per litre on diesel, Rs 30.93 a litre on kerosene and Rs 520.50 per 14.2-kg subsidised LPG cylinder.

In 2011-12, government gave out Rs 83,500 crore by way of cash subsidy.

Moily said he has discussed with Chidambaram the issue of finance ministry providing a cash support of only Rs 30,000 crore as against a demand of over Rs 55,000 crore to cover losses incurred on selling fuel below cost in the first half of current fiscal.

"I am confident they (finance ministry) will meet all the requirement," Moily added.


First Published: Tuesday, December 11, 2012 - 18:27
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