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Q. Need to rationalise of LPG subsidy: Discuss the need to rationalisation of LPG subsidy in India.
Nov 07, 2016 Related to : GS Paper-3

Ans :

Introduction-

Current central government provides subsidy for usage LPG for cooking purpose. It has created huge burden on government’s exchequer. The subsidy has been misused by wealthy class. For better allocation of resources and rationalise the expenditure there is an urgent need rationalise the LPG subsidy in India.

Why need of Rationalisation?

  • Currently bulk of the subsidy provided for LPG is usurped by non-poor households. Subsidised LPG also diverted to commercial usage in black market.
  • At present government provides subsidy of Rs.64 (approx) on each cylinder. Last year’s total subvention bill on domestic LPG and kerosene was about Rs 27,500 crore. 
  • As the total subsidy amount is too high, and bears heavy burden on exchequer, which clearly needs rationalisation. 
  • Similarly, subsidised kerosene is known to be hugely diverted to adulterate automotive fuels. Subsidised kerosene sells at a big discount to the market price, which is perverse incentive to adulterate fuel that, in turn, causes heightened pollution and faster engine wear and tear.
  • Also kerosene, largely used for lighting, is a sooty, polluting fuel that needs prompt phase-out.
  • Hence there is an urgent need to rationalise the subsidy on LPG and also India need to phase-out usage of Kerosene.

Suggestions-

  • The subsidy needs to be better used to rev up supply of solar lanterns and bulbs so as to both tackle energy poverty and stem pollution from fossil fuel.
  • It is also important to institute a competitive market in which private sector companies compete with the public sector oil companies, the resultant competition would also check prices.
  • The way ahead is to firm-up policy for parallel marketing and do away with the stodgy public sector monopoly on LPG cylinders.
  • Similarly there is need to boost piped gas supply in urban areas, which is a more efficient fuel with no upfront pricing subsidy involved. Investing in the pipeline network would add to economic momentum as well.

Conclusion-

The poorer sections of the society to whom subsidies are targeted are not realising the benefits. Most of the subsidies are enjoyed by middle class.  Subsidy on LPG and Kerosene bears huge burden on exchequer, hence it needs to be rationalised.

 


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