Tag: LPG

The real benefit of direct benefit transfer

A week ago, I gave up. My LPG subsidy that is.

Having been out of the country for a few months, with our normal LPG usage being much lower than the average family’s, and having forgotten to book my spare cylinder, my LPG account had been “suspended”, for not booking a refill for over six months.

Back in the day when all domestic LPG connections were subsidised, you were required to book a cylinder every six months, else your account would get suspended. This was a measure to get rid of fake accounts and duplicate connections owned by a family (a family could have only one connection, legally).

So when I went to my dealer last week asking for my account to be unsuspended, I was told to submit my Aadhaar number to get it released. When I said I don’t have an Aadhaar number (I have one, but don’t want to use it unless mandatory), the clerk asked if I could give up my subsidy. With the LPG subsidy being a minuscule part of my overall annual expense, I quickly agreed, and after filling up a form and submitting a copy of my driving license, I had “given up”.

Later that day, my account was unsuspended, and I could presently book a refill, which arrived today. And having “given up”, there is no compulsion now to book a cylinder every six months!

The real benefit of the direct benefit transfer scheme adopted by the union government for LPG subsidy transfer is that it is now possible to have two classes of LPG connections, with several benefits.

Firstly, rules such as minimum and maximum frequency of booking don’t apply any more. Secondly, and more importantly, it is far easier nowadays to get an LPG connection – someone I know went to a nearby dealer to get a connection, and after submitting basic identification documents and paying a deposit, it took only a couple of days for the cylinders to arrive.

You might recall a campaign in the late 2000s by the then Karnataka Energy Minister Shobha Karandlaje to weed out duplicate LPG accounts in order to prevent wasteful subsidy. That brought in a regime of submitting a copy of an electricity bill to get LPG connections, in order to prevent one household from having more than one connection. Consequently, getting a new LPG connection became an absolute nightmare.

With the benefits now being targeted, and Aadhaar based, getting a new LPG connection is mostly straightforward, as long as you don’t claim a subsidy. And a lot of the times, the value of the subsidy is far lower than the additional cost of getting the cylinder itself!

In the earlier “indirect transfer regime”, this class of unsubsidided LPG connection did not exist (unless you went with one of the private sector players, most of whom have remained undependable), causing much harassment to consumers, and the need for various workarounds.

The direct benefit regime has thus not only saved the government the cost of wasteful subsidies, but also made life easier for consumers by making the market more rational!

Gas credits and trading

So last week the government took a decision to increase the number of subsidized gas cylinders per family from nine to twelve per year. People say it is a move aimed at the elections, but it doesn’t impress me. It doesn’t impress me because it doesn’t affect me.

We are a family of two (wife and I), and have a subsidized gas connection. We cook at home daily, but since it’s just the two of us and we’re a “DINK” (double income, no kids) family, we don’t end up using all that much of gas. We use the cylinders strictly for cooking purposes only (not for heating water or running our car), and in the last three years or so when we’ve lived together we’ve averaged about three cylinders a year.

Given that we use only three cylinders a year I’m pissed off that the government has increased the subsidy from nine to twelve cylinders a year! Earlier, subsidy for six cylinders that I was getting was going waste, and now subsidy for nine cylinders is going waste! I don’t like it.

The only statistics that are out about the number of gas cylinders people use is that 90% of the population uses 9 cylinders or less a year, and 97% of the population uses 12 cylinders or less (numbers from a TV debate on the topic I watched last week). What we don’t know is the average number of cylinders consumed by a household with subsidized connection.

Given that I’m not availing of most of my subsidy, I should be allowed to trade in my subsidy for something else – subsidy on petrol maybe? If a family that belongs to the 3% that uses more than 12 cylinders a year, we should be able to strike a deal so that some of my unused subsidy can be channeled to give that family additional subsidy! This is just like carbon credit trading happens – where carbon efficient companies can sell pollution rights to companies that emit more CO2.

If you realize, what I’m getting at is that I don’t want to be “punished” (in terms of lesser subsidy) because I use less gas than the average Indian household. I want the same subsidy, too, so what if I use less gas? Perhaps the subsidy can be given in the form of an unconditional cash transfer?

While on the topic, it is absurd that LPG and all other rations are at the household level, and not individual level. We use only 3 cylinders a year because we are a family of two. Why should we get the same amount of subsidy as (let’s say) a family of twelve? Given that soon we will have universal coverage under UID, the LPG subsidy regime can be modified as follows.

Each individual (from a newborn baby to an adult) will be eligible for two subsidized LPG cylinders a year. For every LPG connection you have, multiple Aadhaar numbers will be attached – this is the list of “dependents” on that particular connection, and the total subsidy is the number of Aadhaars attached times two. Notice that the reason we have the present subsidy regime is that the Aadhaar is a necessary condition for moving to a per capita subsidy regime! Just goes to show how public services can be completely reformed once Aadhaar gets implemented.