New Delhi: The Comptroller and Auditor General of India (CAG) on Friday cautioned the government about possible diversion of non-subsidized cooking fuel meant for households to commercial users to evade tax.

In an audit report on implementation of the direct benefit transfer scheme for liquified petroleum gas (LPG) tabled in Parliament, the apex auditor said that LPG cylinders meant for commercial use in restaurants attracts higher taxes compared to non-subsidized cylinders meant for households and it poses a risk of diversion.

While both commercial and non-subsidized LPG cylinders are not subsidized, the former attracts an 8% excise duty.

The CAG also claimed that the significant reduction in cooking fuel subsidy in the first three quarters of 2015-16 of 23,316 from the same period a year ago was more on account of the sharp fall in crude oil prices than the result of the PAHAL scheme for directly transferring subsidy to consumers’ bank accounts.

“While implementation of PAHAL scheme coupled with the LPG ‘Give it up’ campaign has resulted in the reduction of offtake of domestic subsidised LPG cylinders, the resultant savings was not as significant as that generated through fall of subsidy rates," said the report authored by deputy CAG H. Pradeep Rao.

The report suggested that the reduced offtake of subsidized cylinders by consumers led to a saving of 1,764 crore during the period, while lower subsidy rates had contributed to a saving of 21,552 crore.

The CAG said that for calculating savings from eliminating leakage of subsidy, the national average offtake of 6.2 cylinders should be used, not the maximum number of 12 subsidized cylinders allowed to consumers, which the government had used in its estimate.

The government had in February 2016 estimated the potential savings from PAHAL at 9,211 crore for 2015-16, said the CAG.

The PAHAL scheme helped the government to eliminate duplicate customers from the subsidy beneficiary list, reduce the offtake of subsidized cylinders and increase the sale of market priced ones.

Prime Minister Narendra Modi launched the ‘Give it up’ campaign on 27 March 2015, urging the well-off to forgo cooking fuel subsidy so that the benefit could be given to the really needy. The government is also trying to increase the use of LPG as it will reduce consumption of more polluting kerosene in rural areas for cooking.

In 2015, 15 million new connections were issued, a third of which went to poor households. Under PAHAL, the world’s largest direct benefit transfer scheme, so far more than 30,000 crore has been transferred to beneficiary accounts.

The oil ministry will issue 100 million more LPG connections in the next three years, including 50 million connections for poor families, without an upfront payment.

“This scheme helps in curbing corruption and prevents diversion of subsidy meant for the poor. It is politically rewarding too for the government," said A.K. Verma, political science professor at Christ Church College, Kanpur.

Pretika Khanna contributed to this story.

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