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NEW DELHI -- There is a ray of hope for consumers facing difficulties in getting timely delivery of cooking gas cylinders as the oil ministry may increase the supply of subsidised LPG cylinders and iron out glitches in the supply system to calm tempers ahead of crucial assembly elections.

The new oil minister, M Veerappa Moily, discussed the matter with top executives of state oil firms and senior bureaucrats on Tuesday, government officials said. Several political leaders, including members of the ruling party, say they are facing strong criticism about the move in their constituencies. "The minister has sought details about capping LPG supplies and the impact on customers. He wanted to know how a household can manage with only six subsidised cylinders when more are required," a person who attended the meeting told Media. Congress is worried about the impact of the cap on subsidised cylinders on the assembly elections in Himachal Pradesh where Congress and BJP are perceived to be locked in a close race.

Last month, the government had raised diesel prices sharply and said each household would get only six subsidised cylinders a year to control the uncomfortably high oil subsidy bill, and cut losses of state firms such as Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum. After receiving six subsidised cylinders, consumers would have to pay market prices, which are significantly higher.

The decision to restrict the LPG subsidy was part of a burst of reforms implemented by the UPA government. Any reversal would need the consent of the finance ministry and the Prime Minister's Office. Further, a complete reversal would cast doubt on the government's fiscal consolidation plan. A final decision could thus involve the streamlining of procedures and a rise in the number of subsidised cylinders rather than a wholesale rollback.

After the new system was introduced, numerous consumers complained that gas agencies were not delivering cylinders, leaving them with no fuel to cook. Political leaders, including members of the UPA government, say they are concerned about the possible electoral fallout of the unpopular move. "Whenever I go to my constituency, the people, specially the middle class, are very critical. Teachers, lawyers and bank employees in small towns are very angry and they influence public opinion in small towns," said a minister of state from northern India , who did not want to be identified because of the sensitivity of the matter. Officials said the finance ministry is in favour of effective steps to cut subsidies without hurting the poor. The oil minister is also keen to directly subsidise the poor. In his first interaction with reporters after assuming office, he said he wanted to "expedite efforts in channelising subsidy to the targeted beneficiaries."

Government officials say households on an average require nine cylinders a year. The average was earlier estimated to be 7.2 per household, but this was based on an erroneous calculation that did not account for the fact that out of 14 crore customers, only 11 crore were genuine consumers, and the balance were only on paper for the purpose of diverting subsidised cylinders for commercial use, officials said. Earlier, the human resources ministry had written to the oil ministry that the government must provide subsidised cooking gas cylinders for mid-day meals in schools. The purchase of cooking gas at market rates would raise their costs by Rs 653 crore, the ministry had argued.
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Publication:Pakistan & Gulf Economist
Date:Nov 11, 2012

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