Savings in LPG subsidy: Now, CAG says 92% claimed saving due to crude price drop
The claims by the Central government on so-called savings due to implementation of direct benefits transfer on liquid petroleum gas (LPG), or the PAHAL scheme have been debatable all this while. Now the country's auditor has exposed that very little savings can be attributed to overhauling the scheme. Most of the savings was due to a drop in oil prices. In a report, the Comptroller and Auditor General of India (CAG), said, 92% of the Rs23,316.21 crore the government saved in subsidy payout in 2015-16 occurred due to a drop in crude oil prices and both the government and oil marketing companies had overstated savings under the scheme.
"There was a significant reduction of Rs23,316.21 crore in the LPG subsidy payout due to a combined effect of a decrease in offtake of subsidised cylinders by consumers and lower subsidy rates arising from the sharp fall in crude oil prices during the first three quarters of 2015-16," the CAG said in its report.
The actual subsidy payout during April-December 2015 was Rs12,084.24 crore against Rs35,400.46 crore during the same period in 2014.
had reported that Aadhaar and DBTL savings for FY2016 were less than 1% or Rs121 crore, excluding the costs of implementation, as against Finance Minister Arun Jaitley's claim of an estimated saving of Rs15,000 crore. The news report was based on a revelation by the International Institute for Sustainable Development (IISD) based on publicly available information. (Read: Ghost Savings in DBTL: 99% gap between Jaitley’s claims and actual savings
Coming back to the CAG report, the auditor also pulled up the government and oil marketing companies (OMCs) for inconsistencies in the estimates for DBTL savings. The government estimates savings from PAHAL at Rs9,211 crore, while OMCs estimate it to be about Rs5,107.48 crore in 2015-16.
"The difference came about because the Ministry of Petroleum and Natural Gas (MoPNG) assumed that blocked consumers, who were not eligible for subsidy, would have availed their entire quota of 12 cylinders against the national per capita average of 6.27 cylinders in 2014-15. Considering the national average offtake of 6.27 cylinders, the estimated savings in subsidy for the year 2015-16 would be Rs 4,813 crore," the report said.
According to CAG, based on an average of Rs169.45 per cylinder, and after considering the savings due to the 'Give It Up' scheme in which 6.72 million consumers gave up their subsidy voluntarily, the savings would reduce to Rs3,473 crore instead of Rs5,107.48 crore estimated by OMCs.
PAHAL was expected to weed out fake connections, address concerns over diversion of LPG cylinders for commercial use, decrease the subsidy outgo and generate savings for the government. The scheme was launched in November 2014 in 54 districts and was subsequently extended to the country's remaining 622 districts on January 2015.
In its report, IISD, which analysed the impact of Aadhaar integration into PAHAL and the savings, using publicly available information, and applying the same methodology as adopted to calculate additionality in FY2014-15, it is possible to provide an estimate of the fiscal impact of integrating Aadhaar within the DBTL programme in FY2015-16.
It said, "Assuming an average enrolment cost of Rs120 per person, the marginal cost of enrolling just those customers with Aadhaar-seeded LPG connections as of 1 March 2016 (i.e., not including the costs of non-LPG linked enrolment, or any of the costs associated with implementing and operating the DBTL programme itself) was approximately Rs1,343 crore – 20 times greater than the fiscal saving from integration into DBTL in FY2015-16. An accurate cost-benefit appraisal would also include the direct and indirect costs imposed on beneficiaries."
"Putting aside the relative merits of Aadhaar as a public policy tool, our calculations indicate that, instead of resulting in significant savings, the net fiscal impact of integrating Aadhaar into DBTL in the current financial year was likely to be minimal, and that expectations of substantial net savings in subsidy expenditure from the introduction of the Aadhaar scheme may be misplaced," IISD had said.
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