Consumers need to buy LPG gas cylinders at market price from 1 January 2015

All consumers will have to buy cooking gas at market rates from New Year's Day as the government has issued firm instructions that the subsidy will be transferred directly to bank accounts as it seeks to end illicit supplies to restaurants, cars and factories, besides slashing the subsidy bill and boosting private investment. 

 After recently eliminating the diesel subsidy, which had ballooned to Rs 62,837 crore, Oil Minister Dharmendra Pradhan has now ordered state oil companies to ensure that the scheme — which is being launched as a pilot on Saturday for 2.33 crore customers in 54 districts — is smoothly expanded to the entire country on January 1, 2015. 

Some oil industry executives had expressed doubts about the successful rollout of the scheme to the entire country in barely six weeks of the launch in 54 districts after the UPA government botched up the programme after expanding it to 291 districts just before the general election. It had been forced to withdraw the programme after Congress leaders said it was costing them votes 

The oil ministry is, however, confident about success this time around. "The old DBTL (direct benefit transfer of LPG) scheme failed because Aadhaar number was made mandatory to avail subsidy. We have modified the scheme so that the consumer will not face any difficulty in getting subsidised cylinders," Pradhan told ET.

Under the modified DBTL, a consumer will be eligible for subsidised LPG cylinders even without the Aadhaar number, Pradhan said. 

Embracing DBT Principle

Consumers without the unique ID will also receive cash directly in their bank accounts. They can switch to Aadhaar-based cash transfers once they have been enrolled by informing dealers and banks.

Customers have six months to tell LPG dealers their bank account numbers without losing the subsidy amount. While subsidised cylinders will be delivered to them in the first three months, they will have to buy at market rates after that. The subsidy will be remitted to their bank accounts within the next three months, officials said.

For the first subsidy payment, the money will be transferred to the bank account of consumers as soon as they make the first booking for a cylinder after joining the scheme, prior to delivery. This advance ensures that consumers have extra cash to pay for the first cylinder at market price. The permanent advance shall be notified for consumers now joining the scheme separately. 

The move reflects the embrace of the direct benefits transfer principle introduced, albeit with limited success, by the UPA government. Aadhaar has meanwhile covered more than half the country's population.

"The UIDAI (Unique Identification Authority of India) has, till date, issued over 70.7 crore Aadhaar numbers," the government said in a release on Friday. "Nine states/UTs including Andhra Pradesh, Kerala, Delhi and Himachal Pradesh have crossed 90% Aadhaar coverage, while a further seven states/UTs have Aadhaar coverage of between 70% and 90%."

In the 54 districts in which the pilot is being launched, 95% of consumers already have Aadhaar numbers. The new scheme ensures that consumers receive SMS alerts on their registered mobile numbers at every stage of enrollment in the scheme. 
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