The government of India,
in its March 2012 Union Budget had estimated the subsidy expenditure as 2.2
lakh crore rupees. In an attempt to bring the economy back to track, reduce the
fiscal deficit and under pressure from the IMF and the World Bank, the UPA 2
government decided to bite the bullet and to cut subsidies. Cutting subsidies
meant increase in prices of diesel, LPG, fertilizers, etcetera.
The cutting of LPG
subsidies raised eye brows of every Indian mother and wife. The government
decided that it will provide only six cylinders a year at subsidized rate,
i.e., at Rs. 425. People who needed more would have to shell out Rs. 920 per
cylinder, more than double the amount at which cylinders used to be bought
earlier. Soon, distressed urban people started to think of alternatives like
electric induction cookers, and their rural counterparts thought of bio-gas
plants.
People living in
individual houses or bungalows were not as badly hit as the people
living in apartments. In apartments, many had piped LPG connections. Cylinders
were stored in the society's cylinder bank and gas was supplied to each of the
kitchens via pipes. Here the cylinders were registered with the supplier in the
name of the society and not individuals. This means, in paper, there was only
one single customer. The law said that each customer would be given only six
cylinders at the subsidized rate. This simply meant that irrespective of the
number of houses in buildings, they would only receive six cylinders at a
subsidized rate. One would really wonder how the government managed to not
think of this, while framing the law, when we have a huge percentage of people
in urban India living in apartments.
But to the apartment
living people's relief, the government soon amended the law and
accepted that individual houses in apartments would be considered as separate
customers and that each house would get six cylinders per year at subsidized
rates.
Now, the government has
come up with the 'kind to cash' policy, wherein customers, on displaying their
Aadhar card would be given cash, equivalent to the cost of six subsidized
cylinders. This was done to avoid pilferage and diminish the role of middlemen.
Here again the government has a hurdle to cross. How will the government
implement this policy in apartments where only some houses may have an Aadhar
card and avail this facility, while others who do not have one will have to continue
procuring in kind (cylinders)? Not to forget that each house in the apartment
is considered as separate customer but the gas is still being supplied to
houses from the common society cylinder bank.
Under the 'one house,
one LPG connection' policy, the government had made it illegal for a household
to have multiple LPG connections. However, oil marketing companies have the
powers to make an exception to this policy by giving a household more than one
LPG connection if the household has two kitchens and if they can show that food
is being prepared in both kitchens. In this case, such household will get six
plus six cylinders at subsidized rates. Is it that difficult to show a room as
a kitchen and cook in that room at the time of applying for multiple LPG
connections? This would mean that, that particular customer would get twelve
cylinders per year, throughout if he manages to do this simple malpractice for
a very small period.
Interestingly, the
central government has let it for the states to decide as to how many cylinders
they want to provide to their people at subsidized rates. The states have the
freedom to spend from its exchequer and give more than six cylinders to its
people. It is quite possible that the state governments may do this,
by spending more than what it actually can, or by taking loans and eventually
ask the centre for a relief package or to waive of its debts. Such acts
will defeat the entire purpose of this cap on LPG subsidy.
The restless government
at the centre, with less than two years remaining in power is desperately trying to bring
in reforms. It would be appropriate if they do not take policy decisions in
haste, lest it will shift from policy paralysis to policy puncture.
