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First Published: Thu, Jan 30 2014. 03 21 PM IST
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Aadhaar-linked transfer of LPG subsidy on hold; cylinder cap hiked to 12

The government suspended the transfer until a new committee created to analyse the scheme submits its report
Aadhaar-linked transfer of LPG subsidy on hold; cylinder cap hiked to 12
The move comes days after Rahul Gandhi, vice president of the ruling Congress party, had demanded raising the ceiling. Photo: Priyanka Parashar/Mint
New Delhi: The government on Thursday increased the number of subsidized cooking gas cylinders per household to 12 from nine per year and suspended the transfer of the subsidy to bank accounts linked to Aadhaar unique identity numbers in another bow to populism ahead of a general election only three months away.
Households will get two additional subsidized cylinders in the year ending March and one subsidized cylinder every month starting in April.
The move comes after sustained pressure from the ruling United Progressive Alliance (UPA). Congress party vice-president Rahul Gandhi demanded that the cap be raised to 12 at the All-India Congress Committee meeting on 17 January. Raising the limit would increase the subsidy by Rs.5,000 crore per year.
Transfer of the cooking gas subsidy to Aadhaar-linked bank accounts has been suspended until a committee created to analyse the scheme, including administrative and technical difficulties, submits its report. There have been complaints about the scheme from beneficiaries who don’t have linked bank accounts. Consumers will pay the subsidized price to oil marketing companies, who will receive the subsidy from the government, oil minister M. Veerappa Moily said.
“Since there have been representations coming from across the country to the petroleum ministry, it has been decided that the Aadhaar-linked programme for reimbursing the subsidy will be looked into by a committee,” information and broadcasting minister Manish Tewari said after a meeting of the Union cabinet.
The scheme to transfer welfare payments directly to bank accounts requires accounts linked to Aadhaar numbers so that only an individual identified in beneficiary databases receive the payment. Tewari clarified that only the direct transfer of the cooking gas subsidy has been put on hold and the scheme will continue for other welfare payments such as scholarships.
“The entire ambit of the Aadhaar-linked scheme will be analysed and we will revert to the old system where the consumer has to pay the subsidized price. The 1.7 crore (17 million) people linked to the (direct transfer) paradigm will also get cylinders at subsidized prices,” Tewari said,
The Congress, which has faced popular resentment over the government’s failure to contain inflation, has recently assessed that its support base among women voters—a section that has stood by the 128-year-old party consistently—had diminished because of measures such as the cap on subsidized liquefied petroleum gas (LPG) cylinders.
Chief ministers of Congress-ruled states had sought the intervention of the party vice-president, who in turn, had asked Prime Minister Manmohan Singh to consider the demands for de-linking the supply of subsidized cooking gas from the Aadhaar numbers and increasing the number of subsidized cylinders.
“Rahulji (Rahul Gandhi) is a people’s representative. If he says something, it is taken seriously. It’s not an election-related decision,” Tewari said when asked if the government had taken the decision because Gandhi had made the demand.
The decision comes ahead of the general election due by May in which the Congress party, buffeted by corruption scandals, public disenchantment over the economic downturn and persistently high inflation, faces an uphill battle against a resurgent Bharatiya Janata Party (BJP).
BJP spokeswoman Nirmala Sitharaman said the decision was “political” and that the government had “messed up the whole thing”.
Aadhaar has no legal backing because it had not been created by Parliament, she said, adding that the government could not make the unique identity numbers compulsory for the delivery of welfare benefits. She noted that even the Supreme Court had raised questions on it.
The Unique Identification Authority of India (UIDAI), which is executing the Aadhaar project, said the matter had nothing to do with it.
“This is a change in the manner of delivering the LPG subsidy,” said A.P. Singh, deputy director general. “It is not a UIDAI matter at all.”
Increasing the subsidized cylinder cap to 12 will benefit middle-class and low-income families, said Allahabad-based political analyst Badri Narayan.
“I don’t see it as populist but a big relief for many families. The government was hesitant to do it because of the financial burden, but after Rahul Gandhi pushed for it, the government took the decision,” he said. “Rahul Gandhi must have got feedback from people after Congress lost (in four state) assembly elections. LPG cylinder was certainly an issue for people.”
Raising the LPG subsidy and not raising diesel prices will hurt the economy, according to Arvind Virmani, a former chief economic adviser in the finance ministry and president of not-for-profit organization Chintan.
“This will also prove to be bad for inflation and the current account deficit and would also mean that monetary policy tightening will have to continue, which is not good news for economic growth,” he said. “The government needs to tighten consumption as well as revenue deficit for RBI (Reserve Bank of India) to loosen monetary policy, but the government is going in the opposite direction.”
The cabinet decision comes even as the government is facing multiple challenges to its scheme to transfer welfare payments directly to bank accounts of beneficiaries. On 23 September, the Supreme Court passed a temporary order that was widely seen as challenging the programme that makes Aadhaar-linked bank accounts the only way to receive subsidies and payments.
The court asked government agencies and states to reply to the contention of a batch of petitions filed against the Aadhaar programme’s continuance in the absence of a law.
“No person should suffer for not getting the Aadhaar card in spite of the fact that some authority had issued a circular making it mandatory and when any person applies to get the Aadhaar card voluntarily, it may be checked whether that person is entitled for it under the law and it should not be given to any illegal immigrant,” the court said.
The decision to put the scheme on hold may hinder the process of linking all 140 million cooking gas customers link their bank accounts with their unique identity numbers. “The customers who were coming to get their records updated may not come now though the government has only suspended and not cancelled the direct transfer scheme,” said P.N. Seth, executive vice-president of the All India LPG Distributors Federation. “The oil marketing companies will have to modify the software for billing customers according to the new system where there will be two more free cylinders this year.”
Indian Oil Corp. Ltd, the largest seller of cooking gas cylinders, declined to comment. “We are yet to get the notification,” its spokesperson said. “We will have to study it.”
The sudden decision came even as a suggestion for extending the grace period for receiving the subsidy through Aadhaar-linked bank accounts by about six months in order not to inconvenience consumers was about to be made, said a government official aware of the matter. The official declined to be named.
In another development, the cabinet on Thursday approved work on the Bangalore Metro Rail Project’s second phase that will entail an investment of Rs.26,405.14 crore. The Union government will contribute Rs.5,281 crore and the government of Karnataka’s share will be Rs.8,983 crore. The rest will be raised through debt.
The cabinet also gave its approval for making amendments in the central list of Other Backward Classes in respect of 13 states by way of inclusion, correction and deletion of castes and communities according to advice received from the National Commission for Backward Classes (NCBC). The amendments will notify 115 changes recommended by the NCBC.
The cabinet also approved the Mental Health Care Bill, 2013, which among its many provisions proposes to decriminalize suicide and gives every person the right to access to free mental healthcare and treatment funded by the government. Even though the Bill has been given the cabinet’s nod, there are still certain technical issues that are being worked out.
Aadhaar-linked transfer of LPG subsidy was put on hold while LPG cap was hiked from 9 to 12.
Meanwhile, a ministerial panel on Thursday approved an increase in the fixed cost of urea by Rs.350 a tonne, yielding to a long-sought industry demand but pushing up the government’s subsidy bill by Rs.900 crore. The approval came from a group of ministers headed by agriculture minister Sharad Pawar.
The fixed cost of urea has remained unchanged since 2002-03. For a urea plant, fixed cost mainly comprises establishment cost, annual maintenance cost, working capital, salaries and interest. It is up to 20% of the total production cost.
“Although the industry demanded a hike of Rs.700 per tonne, we are happy with this 50% relief and look forward for further reforms,” said Satish Chander, director general of the Fertiliser Association of India, an industry lobby that has been urging the ministry to raise the fixed cost.
prashant.n@livemint.com
Liz Mathew, Utpal Bhaskar, Asit Ranjan Mishra and Nikita Mehta contributed to this story.
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First Published: Thu, Jan 30 2014. 03 21 PM IST
More Topics: LPG | subsidy | Aadhaar | cylinder | M Veerappa Moily |
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