Good economics is often bad politics. Checking the rising subsidy burden is good economics, but doing it without ensuring adequate support is definitely bad politics.
The Kirit Parikh Committee had recommended a cap on subsidised cooking gas cylinders in 2010. In June 2011, an interim report of a task force on direct subsidy transfer on kerosene, LPG and fertilisers suggested the same. A month ago, the standing committee on petroleum and natural gas submitted its report to Parliament, and a cap on cylinders was recommended.
Apparently, it was something the government had been mulling over since 2009. But why did it choose a time when its credibility had hit the rock bottom? “No government wants to face public anger and take unpopular decisions,” said R.P.N. Singh, minister of state for petroleum. “But what will you do when your oil marketing companies are making a loss of more than 030,000 crore on LPG alone?”
The government has been in a three-phase process of shedding the LPG subsidy. Capping the number of the cylinders was the first phase. In the second, as seen in some pilot projects, it will transfer the cash subsidy to the consumers. “We will have to wait until the Aadhar cards are given to everyone,” said Singh. In the third phase, the LPG subsidy will be given only to specific categories of people.
“The decision to limit domestic LPG cylinders' availability to six annually is at wide variance with the actual recommendation of the standing committee,” said Tapan Sen, MP and member of the committee. The standing committee recommendation, though not unanimous, was to restrict the domestic LPG availability at subsidised rate for people with an annual income of more than 06 lakh, public representatives and those holding constitutional posts.
“The report of the task force on subsidies says that around 40 per cent of the consumers use less than six cylinders a year,” said Singh. But what about the 60 per cent that use more than six cylinders? “I can understand that for some it would be a little painful, but do we have an option?” asked the minister.