Govt attempts to curb fuel subsidies: no multiple LPG connection

Looks like the government is starting to take the first steps to curb fuel subsidies.

A Business Standard report says the oil ministry has launched a drive to ensure that households with just one kitchen will only get one LPG (cooking gas) connection, irrespective of the number of family members.

Another connection will be allowed only if there is another kitchen, the report says. However, an extra cylinder under the same connection will be still allowed on request.

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So what about all those families who already have multiple connections and have a house with just one kitchen? Fear not because oil marketing companies are not looking at cancelling those multiple cooking gas connections, although they remain illegal.

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The drive essentially highlights the government’s need to ensure that excessive subsidies are not doled out.

Domestic LPG is highly subsidised. Oil marketing companies incur a loss of Rs 378 on every cylinder they sell.In the current year, subsidies on domestic LPG totalled Rs 20,516 crore for the period between April and December.

The step, while benefiting the government, will come as unhappy news for several consumers.

However, an increasing number of experts have said that it is time for the government to start limiting fuel subsidies, because they are becoming unsustainable.Slashing fuel subsidies will save the government money that can be spent on building new roads and other infrastructure.

In an interview to the Wall Street Journal, Reserve Bank of India governor D Subbarao noted: “If there is subsidy in LPG, it’s a subsidy that's not going to the poor . It’s a subsidy that’s going to people who can afford LPG, which is certainly not the poor.”

Since hiking prices to eliminate subsidies completely is extremely unlikely because it’s highly unpalatable politically, curbing excessive use of subsidies by consumers who don’t need them has become a possible option for the government.

Nevertheless, prices across all subsidised petroleum products are expected to rise, at least to some extent, next month.A few days ago, The Hindustan Times reported that prices could be hiked by Rs 4 per litre for petrol, by Rs 3 per litre for diesel and Rs 50 per LPG cylinder in March.Oil companies have said there is no alternative to hiking fuel prices, since crude oil prices have soared past $120 a barrel.