#GiveItUP Initiative: An effort to rationalize Domestic LPG Subsidy

India’s LPG market scenario:

Indian government provide subsidy for domestic cooking LPG gas connection. Currently, subsidy is given to all citizens across income group. In a year, each domestic LPG connection is entitled to get 12 subsidized cylinders of 14.2kg each or 34 refills of 5kg cylinders.

As per government estimates, India has about 16cr domestic LPG connections. To provide subsidized cooking gas, Government’s subsidy bill for LPG is at ₹22,000cr for 2015.

However as compared with 71% urban households, in rural area only 21% households have LPG connection. Which means out of about 8cr urban households 5.6cr uses LPG while only 3.4cr out of 16.8cr rural household have LPG connection.

The imbalance is striking and alarming and more importantly, majority of LPG subsidy is given in urban area while needy rural households receives minor share of subsidy benefits. Also, more than 13cr households in Rural India yet to have an access to cleaner cooking fuel such as LPG.

For the government, situation is tricky as LPG subsidy bill is mounting and due to lack of LPG subsidy rationalization, it has fewer resources to increase rural LPG penetration.       

#GiveItUp Campaign:

GiveItUp initiative by government which started by Prime Minister Narendra Modi is slowly changing the situation. Since March 2015 when #GiveItUp started, almost 2 million people had voluntarily given up their LPG subsidy. The target of government for #GiveItUp is 1 core connections.

Currently, difference between subsidized and non-subsidized cylinder is about ₹180 - ₹200 per cylinder. Assuming, each household consumes all 12 subsidized cylinders, annual subsidy per connection is ₹2,200 to ₹2,400.

In a country where removing subsidy could be most anti-popular step, #GiveItUp is certainly positive and courageous step by Indian Government in the right direction. 

 

Who should #GiveItUp:

For any family with good financial condition, annual subsidy of ₹2,500 given of LPG use is insignificant, especially for people living in bigger cities.

Typically, one time restaurant dinner bill for 4-5 people is ₹3,000 in any of metro cities. Branded Denim Jeans costs about ₹2,500 to ₹5,000. Internet broadband connection is anywhere between ₹600 to ₹1,200 per month (i.e. more than ₹7,500 annually). We can discuss many example like this which will emphasize the point that

“People who can afford should “#GiveItUp”

However for any poor family with limited income, ₹2,500 is significant amount which they get in the form of LPG subsidy.

If we want to be part of Developed nation then we have to behave like citizens of Developed nation and understand the fact that for stronger nation resource allocation should be efficient, effective and practical.

 How Government can put criteria for #GiveItUp?

Subsidy rationalization is necessary step for our nation to make long term sustainable economic progress. #GiveItUp campaign for voluntary action to forgo subsidy benefits by economically capable class should first step.

Also, state governments must also be included in #GiveItUp initiative by providing incentive such as “proportion of subsidy savings” in case they help in defined manner.

However, government must take steps to “Take Away” subsidy benefits by setting up some criteria for various segments in the society. Such as

1.     Government Officials:

High ranked government official must #GiveItUp. They should not get further promotions or increment in case they want subsidy. As subsidy is for poorer! 

2.     MPs, MLAs:

Elected public representatives such as MPs and MLAs should not be given LPG subsidy as they get sufficient facilities and perks from the Government. Also, they are expected to lead by example! 

3.     Government Contractors:

If anybody want Government Contract above certain limit / size then they must #GiveItUp first. Till you #GiveItUp, you are not allowed to bid. Also, PSU oil marketing companies must convey fuel pump owners and dealers to #GiveItUp. 

4.     Government Employees in PSUs:

High earning government employees should #GiveItUp. As government have readily available data of these people, subsidy elimination process could be quick and effective. 

5.     High earning employees in Private Sector:

Government should approach all private companies and take away LPG subsidy of high earning employees by setting up limit such as ₹10 lacs per year

6.     Frequent Air travelers:

People who travel by air frequently and spend more than ₹1 lac annually on air tickets must #GiveItUp compulsorily. 

7.     Luxury Car owners:

People who owned luxury cars costing more than ₹15 lacs must not be given LPG subsidy. For new buyer, you cannot buy Luxury car till you #GiveItUp! 

Many more such filters can be placed so as to “Take Away” subsidy from people who do not need it and “Give Away” to those who really need it!

#GiveItUp is good beginning not just for subsidy rationalization but to change the mind set of entire country where “Joy of Giving” can become culture and habit.