Oil marketing firms lose about Rs. 63 crore a day selling domestic LPG below cost

In an attempt to curtail the ballooning subsidy bill, an Empowered Group of Ministers (EGoM) led by Finance Minister Pranab Mukherjee will meet on September 16 to take a decision on curtailing the supply of subsidised LPG cylinders to domestic households to between 4 and 6 per year.

The government is already working on a roadmap for the direct transfer of the kerosene subsidy to beneficiaries in the form of cash, with the intention of doing away with the current practice of supplying subsidised fuel under the public distribution system (PDS). The EGoM during its last meeting on August 8 had considered the recommendations of the Task Force on Direct Transfer of Subsidies on Kerosene, LPG and Fertilizer. It had also debated the LPG subsidy issue but had deferred a decision. A 14.2-kg LPG cylinder costs Rs. 395.35 in Delhi.

The Parliamentary Standing Committee on Petroleum and Natural Gas has already suggested ending the sale of subsidised cooking gas to households with an income of over Rs. 6 lakh per annum. The panel also suggested that those holding constitutional posts and public representatives like MPs, MLAs and MLCs should also not get subsidised cooking fuel.

If the proposal is implemented, affected households will get only four LPG cylinders at a subsidised price.

The calculations were based on a survey done by the oil marketing companies (OMCs), which found that each 14.2-kg cylinder of LPG normally lasts 45-60 days. Based on this calculation, a maximum of six cylinders are considered enough to see a family through the year.

The limited supply of subsidised LPG would be for those who owned a car, two-wheeler, house, or figured in the income-tax list. LPG for commercial use is sold at the market price and packed in a different type of cylinder.

Sources said limiting the supply of subsidised LPG cylinders would help cut down losses that state-owned oil firms incur now on selling the fuel at government-controlled rates. Indian Oil, Bharat Petroleum and Hindustan Petroleum lose about Rs. 63 crore a day selling domestic LPG below cost. The EGoM may also consider the revenue loss that State firms incur on selling not just LPG but also diesel and kerosene. The three firms lose Rs. 5.14 a litre on diesel and Rs. 24.42 a litre on kerosene.

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