Rahul's way: How to kill LPG reform with one sentence

With just one sentence at his AICC speech yesterday (17 January), Rahul Gandhi has wiped out a year’s worth of reforms in one sector - cooking gas subsidies. Slow monthly hikes in diesel prices (50 paise per litre a month) and gradual elimination of LPG subsidies were the centre-piece of reforms announced in January 2013. Now one reform is almost over (LPG), and the other has not managed to cut subsidies one bit (diesel).

Rahul appealed yesterday to “ the Prime Minister to raise the bar of LPG usage from nine cylinders to 12 cylinder s,” and Veerappa Moily jumped in and said “aye, aye sir.”

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[caption id=“attachment_833643” align=“alignleft” width=“380”]  Representational Image. Reuters[/caption]

This single act, of increasing the subsidy limit from nine to 12 cylinders per annum, will mean that 99 percent of consumers will now receive the subsidy. In other words, almost everybody who uses LPG will be subsidised, a report in Business Standard suggests.

If the idea of subsidy reform is to make it available only to those who can’t afford to pay market prices, Rahul has essentially said that only 1 percent of Indians can afford to buy cooking gas at market prices. If this is so, why go through all the hoopla of first calling it a reform, and then announcing an elaborate direct cash transfer (DCT) scheme, and forcing people to get Aadhaar cards to obtain subsidies?

If 99 percent of Indian citizens using LPG are entitled to subsidies, why create an entire superstructure of Aadhaar-enabled cash transfers just to save on the remaining one percent of consumers? Would not the benefit of gains from not subsidising 1 percent be lost by forcing the remaining 99 percent to go through the rigmarole or linking bank accounts through Aadhaar?

As for diesel, the losses per litre remain almost the same as in January last year - around Rs 8-9 a litre despite increases, thanks to rupee depreciation. Today’s diesel prices are significantly higher than last year, but the subsidy is nowhere near elimination.

There is also another way to look at this issue: Rahul’s intervention essentially means 99 percent of people in Aadhaar-enabled districts will get cash in their accounts to buy LPG. Is paying cash to 99 percent of the gas using population not a covert cash bribe before the election?

The Business Standard report quotes oil company officials as saying that before Rahul’s 12-cylinder blast, the subsidy covered 91 percent any way. Now it covers 99 percent. Why not cover all 100 percent and cut out this political rigmarole?