The central government has reduced the subsidy on diesel by Rs. 5 per
liter and put a ceiling on the number of subsidized LPG cylinders to six
per family per year. This has created a wave of protests across the
country.
The reduction of subsidies is not a surprise. Ever since it signed the GATT agreement in 1994, India has been assuring the world that it would remove all oil subsidies. In the review report submitted to WTO in 2002, it said "The subsidy on LPG and kerosene is proposed to be phased out in the next three to five years." The group of 20 nations (G20) of which India is a member passed a resolution at Pittsburgh in 2009 to phase out all subsidies to fossil fuels. India again made a commitment at the Seoul G-20 Summit in November, 2010 that it would phase out all oil subsidies in 3-4 years. But afraid of the political consequences of such a move, the government, instead of removing subsidies at once, has been reducing them bit by bit. It is almost certain that the oil subsidies (petrol, diesel, LPG and kerosene) will be removed completely sooner or later.
It may appear at first sight that putting a ceiling on the number of subsidized LPG cylinders will hurt the poorer sections the most, but studies both by NGOs and the government itself show that the opposite is true. A 2005 study by The Energy and Resources Institute (TERI), a New Delhi-based non-governmental organisation promoting sustainable development, found that the LPG subsidy does not reach the really poor: "76% of the LPG subsidy goes to urban areas with 25% of [India's] total population, and 52% of this urban subsidy is enjoyed by the top 27% of households." Thus the urban and the rich get a disproportionately larger share of the benefits of the LPG subsidy. The Expert Committee on Integrated Energy Policy appointed by the Planning Commission and headed by Dr. Kirit Parikh has also come to similar conclusions.
There is another factor to consider. The total subsidy on the sale of LPG for the financial year 2011-12 was about Rs. 27,000 crore. If there was no subsidy, this huge amount of money would have been available for welfare measures such as employment, education, health, etc. The poor, especially the rural poor, who really need these measures are being denied their benefits because of the subsidy to the less poor.
Dr. Bhamy V. Shenoy, Mysore Grahakara Parishat
The reduction of subsidies is not a surprise. Ever since it signed the GATT agreement in 1994, India has been assuring the world that it would remove all oil subsidies. In the review report submitted to WTO in 2002, it said "The subsidy on LPG and kerosene is proposed to be phased out in the next three to five years." The group of 20 nations (G20) of which India is a member passed a resolution at Pittsburgh in 2009 to phase out all subsidies to fossil fuels. India again made a commitment at the Seoul G-20 Summit in November, 2010 that it would phase out all oil subsidies in 3-4 years. But afraid of the political consequences of such a move, the government, instead of removing subsidies at once, has been reducing them bit by bit. It is almost certain that the oil subsidies (petrol, diesel, LPG and kerosene) will be removed completely sooner or later.
It may appear at first sight that putting a ceiling on the number of subsidized LPG cylinders will hurt the poorer sections the most, but studies both by NGOs and the government itself show that the opposite is true. A 2005 study by The Energy and Resources Institute (TERI), a New Delhi-based non-governmental organisation promoting sustainable development, found that the LPG subsidy does not reach the really poor: "76% of the LPG subsidy goes to urban areas with 25% of [India's] total population, and 52% of this urban subsidy is enjoyed by the top 27% of households." Thus the urban and the rich get a disproportionately larger share of the benefits of the LPG subsidy. The Expert Committee on Integrated Energy Policy appointed by the Planning Commission and headed by Dr. Kirit Parikh has also come to similar conclusions.
There is another factor to consider. The total subsidy on the sale of LPG for the financial year 2011-12 was about Rs. 27,000 crore. If there was no subsidy, this huge amount of money would have been available for welfare measures such as employment, education, health, etc. The poor, especially the rural poor, who really need these measures are being denied their benefits because of the subsidy to the less poor.
Dr. Bhamy V. Shenoy, Mysore Grahakara Parishat