Delhi, 15 May, (Argus) – India's new direct benefit transfer scheme (DBT) for LPG, being introduced from 1 June, may help trim state subsidies by 25pc this fiscal year by plugging black marketing of cylinders, and stanching multiple connections. It will also boost demand for the fuel.
Under DBT, Delhi will transfer household subsidies to a bank account linked to a unique identification number being given to every Indian citizen. Households will then pay the market price for each cylinder. Until now consumers have paid the subsidised price for each 14.2kg cylinder, and the government reimbursed the subsidy amount directly to oil companies.
The DBT will be initially introduced in 20 districts on 1 June 1. The scheme will be extended to the entire country from September.
Under recoveries on LPG rose by 32pc to about 396bn rupees ($7.2bn) for the year ending March 2013 from a year earlier in spite of Delhi introducing an annual cap on supply of subsidised cylinders, according to the oil ministry. A 14.2kg cylinder is supplied by the government at Rs 410.50, less than half of what it costs in the market.
The new policy will increase overall demand because it will stop illegal connections, forcing consumers and businesses to pay market prices for the fuel. There are 140mn LPG consumers in the country. Some 26mn connections are estimated to be fraudulent.
State-run oil companies plan to issue 55mn new connections in rural and urban areas to meet a 75pc penetration goal by 2015 from about 50pc now.
State-owned IOC forecasts that Indian LPG imports could reach 8mn t/yr by 2021 from 5mn t now. Domestic output during that period will rise by 58pc to exceed 15mn t/yr, the country's biggest refiner said.
A report commissioned by India's government recommended that the country's LPG subsidy be fully removed by the 2014 fiscal year. That target is unlikely to be achieved with 2014 being an election year.
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