LPG subsidy: Rahul's populist punch might pinch OMCs

Under pressure from Congress Vice-President Rahul Gandhi, the government will increase the cap on subsidised liquefied petroleum gas cylinders to 12 a year.

With this, 99 per cent of LPG consumers will be eligible for subsidy on all refills.

Petroleum Minister M Veerappa Moily confirmed the cap on LPG cylinders will be increased soon, adding a Cabinet proposal will be moved in this regard.

“The move will increase under-recovery figures by Rs 3,600 crore (Rs 36 billion).

While nine cylinders cover about 91 per cent of LPG customers, this move will cover 99 per cent of the customers, especially in places where the Aadhaar scheme is in place,” said an official close to the development.

. . .

“This will bleed oil marketing companies, which reported total underrecoveries of Rs 60,907 crore (Rs 609.07 billion) for the first half of 2013-14.

It is expected for the entire financial year, these will stand at about Rs 1.4 lakh crore (Rs 1.4 trillion).

Officials say only one per cent consume more than 12 cylinders a year.

In September 2012, the government had capped the number of LPG cylinders at six to reduce the subsidy burden.

However, this was increased to nine on January 17, 2013.

. . .

In Delhi, the price of a non-subsidised cylinder stands at Rs 1,258, while a subsidised one costs Rs 414.

At an All India Congress Committee meeting on Friday, Gandhi said, “I want to tell the prime minister nine cylinders are not enough. We need 12 cylinders.”

The underrecovery on domestic LPG cylinders now stands at Rs 762.7 a cylinder.

For the second fortnight of this month, underrecoveries on diesel fell to Rs 8.47 a litre; it stood at Rs 9.24 a litre in early January.

In the case of kerosene, underrecoveries stand at Rs 37.33 a litre.

Oil marketing companies are recording a daily underrecovery loss of Rs 464 crore (Rs 4.64 billion) on the sale of diesel, kerosene and LPG.