LPG subsidy leaves more questions than answers

Updated - October 20, 2013 07:40 pm IST

Published - February 09, 2013 03:27 pm IST - HYDERABAD:

The ongoing process of linking Aadhaar card and bank account with LPG gas connections is throwing up questions that defy answers. While the authorities point out that the subsidy money will be credited to the customer’s bank accounts directly, the question as to how much money will be returned and the time required for processing remains unexplained.

Currently a domestic gas cylinder costs Rs. 437, and the unsubsidised gas cylinder is being pegged at Rs. 1,031. However, according to Transparency portals (http://bit.ly/14FPPlE), marketing companies are bearing a subsidy burden of about Rs. 344 per cylinder, which means the cost of an unsubsidised cylinder will be about Rs. 800 (inclusive of taxes) and not Rs. 1,031, argues D. Ashok Kumar, president of Hyderabad LPG Dealers’ Association.

Will the government refund the subsidy amount of Rs. 344, which the oil companies claim to be bearing according to their websites, or will they pay the differential amount, which works out to Rs. 594 (Rs. 1,031 less Rs. 437)?

If the subsidy component of Rs 344 is to be refunded, the unanswered question is what will happen to the remaining Rs. 250 per cylinder.

The authorities have also not explained the tax burden that customers have to bear for buying unsubsidised gas cylinders. “At present customers pay Value Added Tax (VAT) of Rs. 22 per cylinder, but for an unsubsidised gas cylinder, VAT would increase to about Rs. 50.” This will generate an additional inflow of more than Rs. 220 crore a year to the exchequer, he explained.

When a gas cylinder is given on subsidy, the customer is not taxed for the subsidy amount. But when he pays money for unsubsidised gas cylinder, he will also have to pay tax. It is also not clear if the government will refund the tax amount along with the subsidy amount, Mr. Kumar said. The idea of linking Aadhaar card with LPG connection is fine, but there are many issues that have to be sorted out before realising the benefits of the initiative, Mr. Kumar observed, pointing out that the whole process of linking Aadhaar number could have been made easier.

Oil companies have already collected the mobile numbers of customers for booking cylinders online or through SMS. In the same manner, they could have made provisions for updating their Aadhaar numbers through SMS, he observed. “Instead of making it convenient for the customers, the companies and the government have dumped the responsibility of linking the mobile, Aadhaar and bank account numbers on the customer himself,” he added.

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