India’s Direct Benefit Transfer for the LPG Programme is not Subsidy Reform (Kieran Clarke ,9 March 2015 in IISD)

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In August 2014, the newly-elected National Democratic Alliance (NDA) administration announced the reintroduction of the previous government’s then-suspended ‘Direct Benefit Transfer for LPG’ (DBTL) programme to distribute LPG subsidies by bank transfer, while retaining (against the recommendations of both the petroleum and finance ministries, and despite extensive media speculation) the annual cylinder cap per household first instituted (but twice raised) by the United Progressive Alliance (UPA) administration at its existing level.

There is a long-standing consensus, both within and outside government, on the need to reform India’s cooking gas subsidies. In the last financial year, the Indian government spent Rs. 48,378 crore (US$7.8bn) subsidizing Liquefied Petroleum Gas (LPG) – Rs. 8,756 crore (US$1.4bn) more than the equivalent central budget allocation for primary education, and Rs. 15,378 crore (US$2.5bn) more than the allocation to the flagship National Rural Employment Generation Scheme (NREGS) public employment programme. The bulk of this subsidy transfer accrued to wealthier households in urban areas, with the majority of the population in the bottom two-thirds of the income distribution scale (who currently use highly-polluting and inefficient solid fuels) receiving little or no direct benefit.

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