LPG savings due to DBT less than Rs 2000 cr: CAG may punch holes in govt claim

A CAG report on LPG subsidy is on the way, which is likely to punch holes in the NDA government’s claims about savings from its much-talked about direct benefit transfer (DBT) scheme, according to a report in The Hindu newspaper on Wednesday. The report says that the CAG audit has found that the actual savings on LPG subsidy owing to DBT and exhortation to give up subsidised connection could be actually less than Rs 2,000 crore. This is against the government claim that the savings were Rs 22,000 crore in two years - 2014-15 and 2015-16. [caption id=“attachment_2905038” align=“alignleft” width=“380”]  Reuters[/caption] According to The Hindu report, the government saved so much not because of the DBT and the GiveItUp campaign but owing to the sharp fall in global crude oil prices. During the two years, global crude oil prices declined 65 percent from about $106 a barrel to around $36. The CAG report will be tabled before Parliament in the Monsoon Session. DBT or PAHAL (Pratyaksh Hanstantrit Labh) is designed to ensure that the benefit meant for the genuine domestic customer reaches them directly and is not diverted. The government hopes to save public money through this process. In order to avail of the LPG subsidy consumers need to register their mobile number with the distributor and also link their bank account with their Aadhaar number. The government began paying subsidy directly into bank accounts of cooking gas consumers in select districts from November 2014 and in the rest of the country from 1 January 2015. Through the GiveItUp campaign, the government urged the well-to-do consumers to not avail the subsidy so that it will help the government save on the outgo. In May, oil minister Dharmendra Pradhan had claimed that the government has saved over Rs 21,000 crore in cooking gas LPG subisdy in the last two financial years as DBT helped eliminate duplicate connections as well as diversions. As on 1 April 2015, there were 18.19 crore registered LPG consumers and 14.85 crore active consumers implying a gap of 3.34 crore consumers which were duplicate, fake or inactive accounts. “Eliminating such 3.34 crore consumers helped save Rs 14,672 crore in 2014-15 fiscal (year ending March 31, 2015),” Pradhan had said. The minister had said the savings in 2015-16 was about Rs 7,000 crore, lower than the previous fiscal mainly because of the fall in global oil prices, thereby cutting the subsidy required. “An average of Rs 366 per cylinder subsidy was considered for 2014-15 fiscal,” he said. “If we take into account the quota of 12 cylinders per consumer and the average LPG subsidy of Rs 336 per cylinder for the year 2014-15, estimated savings in LPG subsidy due to the blocking of 3.34 crore accounts works out to Rs 14,672 crore, during that year,” the minister said explaining the rationale behind the calculation. However, this is not the first time that the savings from these programmes have come under scanner. In October 2015, a study by Kieran Clarke and Shruti Sharma of the International Institute for Sustainable Development (IISD) had found that the actual savings of the government in 2014-15 could have been only Rs 143 crore or just 1.12 percent of the government’s claim of Rs 12,700 crore savings. “…Regardless of the potential impact of introducing DBTL on total subsidised LPG consumption, it would be very difficult for the scheme to have delivered significant savings in total subsidy expenditure in FY 2014-15, as the vast majority of connected households retained formal access to subsidised LPG under the previous subsidy distribution mechanism,” they said in an article on The Wire. Taking a cue from the claimed success of the programme, the government is now planning to extend the DBT scheme to kerosene (DBTK). Pradhan had said the scheme will start roll out in June or July on a pilot basis and depending on its success extended to rest of the country. LPG and kerosene are the only two subsidised fuel remaining with petrol being market priced from June 2010 and diesel from October 2014.