Government soon to introduce new mechanism for distribution of LPG: FM

The government will soon introduce a new mechanism for distribution of liquefied petroleum gas (LPG), under which poor will get direct cash subsidies. The Finance Minister Pranab Mukherjee said a pilot project will soon be launched on a new system of LPG distribution.  The new mechanism would be based on the recommendations made by Unique Identification Authority of India Chairman Nandan Nilekanim, for the direct subsidies on kerosene, LPG and fertilizer.

Last month, Unique Identification Authority of India Chairman Nandan Nilekani, had submitted its report to the finance minister, in that report, task force, had suggested direct cash subsidy to poor. The committee had suggested transfer of cash subsidy through banks and ATMs directly to the poor.

The system of direct cash subsidy would be launched as polite project in seven states that is Maharashtra, Haryana, Rajasthan, Orissa, Assam, Tamil Nadu and Delhi. After six months, based on the experiences from these seven states, the system would be introduced in all over India.

Earlier in July this year, the UIDAI suggested direct cash transfer through banks and ATMs to the targeted groups to ‘plug leakages’ in the implementation of direct cash subsidy - a move that is expected to revolutionize the subsidy payment mechanism for LPG cylinder and kerosene oil to the beneficiaries, especially poor sections, and change the fertilizer subsidy payment mechanism to the farmers.

As per current estimates, the government’s spend on fuel and fertilizer subsidies stands at around Rs 73,637 crore a year. Interestingly, major portion of it unfortunately does not reach the beneficiaries. This move by the government is also likely to completely revamp the working of the public distribution system (PDS), which is considered inefficient and ineffective. On the other hand, the government is of the view that implementation of direct cash transfers would also bring down the subsidy burden as the money would directly go to the ‘genuine’ beneficiaries including those who are Below Poverty Line (BPL). It would also lead to drastic fall in adulteration and diversion of diesel and kerosene to the black market.