Refuting CAG Claims, OilMin Sticks To Rs 21k cr of Savings in LPG Subsidy in Past 2 Yrs

Refuting CAG Claims, OilMin Sticks To Rs 21k cr of Savings in LPG Subsidy in Past 2 Yrs

The Ministry of Petroleum and Natural Gas on Wednesday refuted reports of any mis-calculation of subsidy savings on LPG and maintained that the total savings from the elimination of fake/duplicate/ghost connection as a result of implementation of DBT for the two last years is estimated at more than Rs. 21,000 crore.

In reference to a news report (of 20th July) under the caption “CAG audit nails Centre’s claim on LPG subsidy saving”, the ministry clarified that an intensive exercise was carried out for identifying duplicate/fake/ghost/inactive domestic LPG connections and, as of 01.04.2015, 3.34 Crore such connections were identified by the Oil Marketing Companies (OMCs).

As a result of implementation of DBTL (PAHAL) mechanism, it became possible to block these 3.34 Crore LPG connections as the subsidy was transferred in the accounts of only those consumers who had registered under PAHAL and who have been cleared after de-duplication exercise.

Before DBTL, all or many of these 3.34 crore consumers would have continued to purchase subsidized cylinders from the distributors. But for the blocking of these accounts, the subsidy bill would have been much higher despite fall in crude oil prices.

The ministry has given the following details on its Estimated Savings and Calculations:

For the financial year (FY) 2014-15, for 3.34 crore consumers outside the PAHAL net, the Estimated savings would be 3.34 crore x 12 cylinders x Rs.369.72 (average Subsidy/cylinder for FY 2014-15) equal to  Rs.14,818.4 crore, it said, adding that following a similar principle, the Savings estimated for FY 2015-16 is Rs.6,443 crore and the total for both the years works out to Rs. 21,261 crores.

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FINANCIAL YEAR Average Subsidy per Cylinder (for that year) CALCULATIONS Estimated Savings (in crores of rupees)
2014-15 Rs. 369.72 3.34 * 369.72 * 12 14,818.4
2015-16 Rs. 150.82 3.56 * 150.82 * 12 6,443
TOTAL 21,261.4

 

The ministry added that the total consumption of cooking gas in any given year is a combination of the number of connections at the beginning of the year, bogus connections eliminated during the year through the process of DBT under PAHAL, new connections issued to genuine consumers during the year and normal fluctuations in individual consumption.

Hence, it said that the saving from implementation of DBT cannot be correctly computed merely by reference to the total consumption in a year or the total expenditure on subsidy.

“If the DBT had not been implemented, the outgo on the subsidy would have been higher by Rs. 14,818 crore in 2014-15 and Rs. 6,443 crore in 2015-16. Hence the total savings from the elimination of fake/duplicate/ghost connection as a result of implementation of DBT for the two years together, as calculated above, is estimated at more than Rs. 21,000 crore,” said a statement of the oil ministry.

“This figure is not comparable with the actual expenditure on subsidy which includes the subsidy on new genuine connections given during these two years.”

Without implementation of PAHAL, subsidy burden would have been higher than the actual expenditure recorded during these years, even with lower petroleum prices.

Furthermore, the ministry said that it should be noted that concrete evidence of successful elimination of bogus connections is seen in the phenomenal growth of non-subsidized commercial LPG sales which have registered an increase of 39.3% in the period April 2015 to March 2016.

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This, it said, is in contrast to the pre-PAHAL experience when commercial sales growth was negligible or declining.

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