The government is set to relax the limit on subsidized cooking gas for homes as the Congress party looks for ways in which it can retrieve ground ahead of the general election after heavy defeats in recent assembly polls, a move that will mean a further retreat from the few reforms that the United Progressive Alliance put in place in its second term.
Households may be entitled to 12 gas cylinders per year at subsidized prices, up from nine now, if the government allows itself to be persuaded by Congress party leaders including chief ministers, according to people close to the development. Such a move may help the UPA recoup some of the political capital it has lost due to the rise in prices amid a slump in growth.
"Yes, there are some discussions about re-looking at the current annual cap on the supply of subsidized LPG cylinders," said a government official.
The UPA government had, in the face of economic difficulties brought on by sluggish growth and rising fuel prices, imposed a limit of six subsidized cylinders per household last year that was revised to nine early this year. The move aimed at slashing the subsidy burden was criticized by political parties and consumers, who said it would add to the burden of rising inflation.
The move to raise the cylinder limit fits in with what party president Sonia Gandhi identified as a key reason for the state poll debacle - rising prices.
The demand for a revision in the limit emerged at meetings on Friday held by party vice president Rahul Gandhi with chief ministers of states run by the Congress. Also in attendance were senior cabinet ministers and All India Congress Committee officials. They wanted an "immediate revision" of the gas cap and said it was a major source of "popular resentment" against the Congress and the UPA, according to a person who a person who was present at the meeting.
Implementation of the limit has created "economic problems for the consumers" and "social chaos", the person said.
The Congress leadership, including Gandhi, were sympathetic and understood the political reasoning of the party's regional satraps, according to this person.
However, any largesse in the final few months of the government's term will need to be balanced by finance minister P Chidambaram's determination to hold the "red line" on the fiscal deficit at 4.8% of gross domestic product, given that global rating agencies are watching for any slipups on this front.
A worried government is also looking to squeeze spending and maximize revenue collections in the last three months of the fiscal year amid uncertainty over whether the economy has bottomed out. Still, as ET reported on Monday, this may also mean refunds to exporters getting delayed to next year, along with subsidy payments to fertiliser and oil companies. So the bill for any increase in subsidized gas supplies may not come due this year.
Along with the cap on cylinders, the oil ministry had embarked on a campaign to identify genuine users and plug leakages through the direct transfer of subsidies, which has also led to substantial savings.
"We have blocked 67 lakh bogus connections, thereby reducing the annual subsidy burden by Rs 2,000 crore," oil ministry spokesman RC Joshi said on Friday.
The oil ministry, which aims to roll the plan out to more than 9 crore customers by January, has covered 6.57 crore customers in 184 districts since June. India has more than 14 crore cooking gas customers who are entitled to subsidized prices for home use. Those who exceed the nine-cylinder limit need to be buy gas at the market rate. In Delhi, the market price is Rs 1,021, while the subsidized rate is Rs 414.
The Friday meeting, which took place in the wake of the assembly elections, debated ways in which the party could tackle corruption and the price rise and drew up steps that India's 12 Congress-run states would adopt in this regard.
These include keeping fruits and vegetables out of the Agricultural Produce Markets Committee system to lower prices; invoking the Essential Commodities Act to deal with hoarding, black marketing and profiteering; reforming the public distribution system to eliminate leakages as stipulated in the Food Security Act; and setting up fair price shops to sell fruit, vegetables and eggs at reasonable prices.
These decisions "amounted to the leadership backing the governments effectively intervening" to deal with inflation, which amounts "to distancing itself from the economic theory of letting market factors decide prices," said the person cited above.
Source:- timesofindia.indiatimes.com
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