The Ministry of Finance has reduced the petroleum subsidy to Rs 12,995 crore for FY 2022. In the same budget, the government has said that the number of beneficiaries under the Ujjwala scheme will be increased to one crore. The government hopes that increasing the prices of LPG cylinders will reduce the subsidy burden on them. According to the Mint report, a government official has said that the government is moving towards abolishing the subsidy. This is the reason why the prices of kerosene and LPG are continuously increasing.
Let me tell you that there was a steady increase in the price of LPG also last year. Compared to the increase in the price of petrol, it is less. A similar situation may be seen next year. Only retail fuel vendors revise the price of LPG cylinders. LPG depends on the international benchmark and the exchange rate of the rupee against the dollar. The government sends the subsidy amount for LPG directly to the beneficiaries’ account under direct benefit transfer, while kerosene is sold at a concession rate through the public distribution system.
The 15th Finance Commission report said, “After these measures, the revenue receipt through petroleum subsidy has come down from 1.6% in 2011-12 to 9.1% in 2011-12.” It has come down from 0.8 per cent to 0.1 per cent in terms of GDP. At the same time, the kerosene subsidy was Rs 28,215 crore in 2011-12, which has come down to Rs 3,659 crore in the budget estimate for the financial year 2020-21.
The Finance Commission has stated in its report that the Ujjwala scheme may increase the burden of LPG subsidy but, the subsidy scheme is confined to the poorer class or this burden can be reduced by capping the number of subsidized cylinders. Significantly, the Ujjwala scheme was launched on 1 May 2016. Under this scheme, families living below the poor line are given Rs 1,600 for LPG connection.