New Delhi, Feb 2: The Covid-induced demand suppression and subdued global oil prices have helped the central government to move rapidly in the direction of complete elimination of fuel subsidy.
While kerosene subsidy has been brought to a naught in Budget 2021-22, payment of subsidy under direct benefit transfer (DBT) scheme towards domestic cooking gas has been brought down to less than half of FY21 levels.
As per this year’s budget, DBT transfer towards LPG subsidy has been brought down to Rs 12,480 crore in FY22 from Rs 25,520.79 crore in the revised estimates for FY21.
The budget estimate for LPG subsidy this year was even higher at Rs 35,605 crore but subdued global prices helped the government to save on LPG subsidy prices that got used for providing three free cylinders to Ujjwala consumers during the lockdown period.
Sources said that price of a 14.2 kg subsidised LPG cylinder now (in January) is around Rs 694, the same as the price of non-subsidised cooking gas in Delhi.
With around 30 crore LPG connections in the country, the leveling of non-subsidised and subsidised LPG cylinder prices would help government substantially reduce DBT payments in FY22.
If oil and products prices remain range-bound even next year, by the end of the year even LPG subsidy would be completely eliminated, oil sector experts said.
The government’s DBT burden even from middle of the current fiscal has reduced to nil due to softer LPG prices. The only money that the government would need in FY22 is towards providing free cooking gas connections to 1 crore additional beneficiaries under the Ujjwala scheme.
With regard to kerosene, the subsidy support had already come down to negligible levels in the current fiscal, making it easier for the government to provide no central subsidy in the budget.
This is for the first time in many years that no money has been earmarked towards kerosene subsidy. With government providing LPG connections to poor households under Ujjwala Yojana and reducing the allocation of kerosene to the states, the need for subsidy towards this polluting fuel has petered out.
In earlier months, the price of kerosene was also raised by small amounts so that its prices were brought closer to market rates. Subsidy is now only extended by a few states. In fact, Delhi has become a kerosene-free state.
In FY21 (RE), the government provided a mere Rs 39 crore towards DBT in kerosene and another Rs 2,677.32 crore for under recovery (other subsidy payable).