New Delhi, Feb 09: The Ministry of Finance has reduced the petroleum subsidy to Rs 12,995 crore for FY 2022. In the same budget, the government has said that the number of beneficiaries under the Ujjwala scheme will be increased to one crore. The government is hopeful that the burden of subsidy on the Centre will reduce if it increases prices of LPG cylinders. According a report in Mint, a government official has said that the Centre is moving towards abolishing subsidy. This is the reason why the prices of kerosene and LPG are continuously increasing.
Steady increase in fuel prices
It may be recalled that there was a steady increase in the price of LPG in 2019 too but this increase is less when compared to the increase in the price of petrol. A similar situation may occur in this year too. The price of LPG cylinders is revised by retail fuel vendors.
How is LPG cylinder price decided?
LPG cylinder price depends on the international benchmark and the exchange rate of the rupee against the dollar. The government sends the subsidy amount for LPG directly to the beneficiaries’ account under direct benefit transfer, while kerosene is sold at a concessional rate through the public distribution system.
15th Finance Commission report
The 15th Finance Commission report stated, ‘After these measures, the revenue receipt through petroleum subsidy has come down from 1.6% in 2011-12 to 9.1% in 2011-12. It has come down from 0.8 per cent to 0.1 per cent in terms of GDP. At the same time, the kerosene subsidy was Rs 28,215 crore in 2011-12, which has come down to Rs 3,659 crore in the budget estimate for the financial year 2020-21.”
What is Ujjwala scheme?
The Finance Commission has stated in its report that the Ujjwala scheme may increase the burden of LPG subsidy but the subsidy scheme is confined to the poorer class or can be reduced by capping the number of subsidized cylinders.
When was Ujjwala scheme launched?
The Ujjwala scheme was launched on May 1, 2016. Under this scheme, families living below the poverty line are given Rs 1,600 for LPG connection.