5901 - Why DBT in LPG is a must - Financial Express

Why DBT in LPG is a must

| Updated: Oct 25 2014, 02:01 IST

SUMMARY

While the government has decontrolled the price of diesel, the next critical reform would be to bring down under-recovery in domestic LPG.

While the government has decontrolled the price of diesel, the next critical reform would be to bring down under-recovery in domestic LPG. In FY14, under-recovery from LPG was over R46,000 crore, which rose 4.5 times from that in FY06. The gap between production and consumption is widening and India has to import LPG to meet its rising domestic demand.

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The government’s decision to re-introduce direct benefit transfer (DBT) for LPG in 54 districts from mid-November, which was put on hold by the UPA government in January ahead of the Lok Sabha elections, is a positive move. The government has announced that the subsidy per cylinder will be now fixed and even people not having Aadhaar numbers can have the subsidy transferred to their bank accounts. This will reduce leakages and subsidies can be targeted at the poor.

There is unequal distribution of subsidies across rural households, as the proportion of subsidies that go to the poorest quintile is just 0.07% as compared to 52.6% for the richest quintile, according to the Kirit Parikh report on pricing of diesel, LPG and kerosene. In urban areas, the report says, though the proportion of subsidies that goes to the poor is still low at 8.2%, there is a more equitable distribution across other quintiles. In the past one year, some weeding out of fake LPG consumers has already taken place. So, with direct transfer of cash to bank accounts of LPG consumers, the government is expected to save nearly R10,000 crore.

Under the modified DBT scheme, all LPG consumers, who had already joined the scheme based on Aadhaar numbers, will start getting subsidy in their Aadhaar-linked bank accounts. The LPG consumers will get a grace period of three months during which those who have joined the scheme will get subsidy in bank accounts and others will continue to get cylinders at subsidised price.

5888 - Legal framework needs to be put in place for Aadhaar: Govt - Money Control

Legal framework needs to be put in place for Aadhaar: Govt

Anurag Jain believes subsidy can also be provided without a compulsion of Aadhaar card as money can be directly transferred into bank accounts of individuals

Along with the announcements on diesel deregulation and the gas price hike, the government made another important announcement about relying on direct benefit transfer (DBT) to save money especially for liquefied petroleum gas (LPG).

However, the government's preparedness on DBT will depend on hassle free banking system and reach of Aadhaar cards. Speaking to CNBC-TV18, Anurag Jain, Joint Secretary, Department of Financial Services says the Pradhan Mantri Jan Dhan Yojna (PMJDY) aims to provide bank accounts to everyone in the country and the movement has been initiated in a very big way.

According to him, the government wants to ensure that every micro planning area is being serviced via bank. The move will give way to the DBT of the subsidy into the account. Nearly 291 districts are ready for the DBT rollout.

He believes subsidy can also be provided without a compulsion of Aadhaar card as money can be directly transferred into bank accounts of individuals.

Jain further suggest that DBT must be of two types, one is the Aadhaar-based and the other non-Aadhaar as there are only 69 crore people (out of 125 crore) with Aadhaar account currently.

"Aadhaar connectivity is 55-60 percent and increasing. Legal framework needs to be put in place for Aadhaar,” adds Jain.

Below is verbatim transcript of the interview:

Q: How prepared is the banking system plus the Aadhaar, how much of Aadhaar is seeded into the bank accounts? If you can give us some numbers especially in the below poverty line (BPL) families where DBT will be effective?

A: We have already undertaken PMJDY as one of the major programmes for the country and are pressing hard. We review it almost on a weekly basis. New 6 crore accounts have been opened.

Under PMJDY, our first target is to ensure that we are able to provide banking facilities in every corner of the country.

There the planning is that we have got microplanning areas, about 5 kilometre radius circles have been drawn on the map of the country and we are trying to ensure that every such microplanning area is served either by a bank branch or by a fixed point online interoperable banking kiosk.

If we have a banking facility like that, for a citizen or an user there is no difference in the experience whether he is going to be a branch or banking kiosk and they are all technology enabled.

We are undertaking this drive in a big way and we need to set up about 1.55-1.56 lakh such centres out of which about 1.2 lakh centres have already been set up.

However, there are issues like all machines not being there. So that is going to take some time maybe, before the end of the year we will have all these places ready barring some 3,000-4,000 places where there are some connectivity issue.

By and large the whole country will have such banking points through which our citizens, villagers can access the cash-out points and that is one of the most important things for being DBT ready.

The second issue is Aadhaar connectivity. Aadhaar generation is between 55 percent and 60 percent in the whole country and is increasing by the day, an updated figure would be available with the UID authority.

When I looked at the data last week, 69 crore out of 125 crore population had Aadhaar number.

If you look at the seeding, which is also increasing by the day, overall about 8.75 crore bank accounts have got seeding done and out of the 6 crore accounts, which are opened under PMJDY, about 2 crore accounts have got Aadhar seeding done and that is the way we are going forward.

However, there will be certain issues, there was an order by the Supreme Court (SC) where it said that Aadhaar cannot be a compulsion for giving services.

Therefore, till the time the legal framework is put in place, what UID authority is trying to do and they are able to explain and get a revised order from SC whenever we want to do this DBT, it will have to be of two kinds, one is the Aadhaar-based and another is non-Aadhar based.

We were having this in LPG earlier which was discontinued in March 2014 and by that time we had extended it to 291 districts, there is a ministry of petroleum which was doing it, we were assisting.

In 291 districts the work has already begun, 2.9 crore LPG holders out of about 9 crore total connections have got their Aadhaar number seeded in the bank account and LPG data base both.

So they were the DBT ready customers and that was being done. In 42 districts, work had already been completely switched over to market price mechanism or transfer of subsidiary only through the Aadhaar based accounts.

5882 - DIESEL DEREGULATED, PRICE CUT BY RS3.37/L - Daily Pioneer

DIESEL DEREGULATED, PRICE CUT BY RS3.37/L

Sunday, 19 October 2014 | PNS | New Delhi

Literally making the most of an ideal fiscal situation when inflation is at a five-year low and crude oil prices have fallen to $83 per barrel, the Government on Saturday deregulated diesel prices and hiked natural gas price from the existing $4.2 per mmBtu to $5.61 per mmBtu. The increased gas price regime will come into effect from November 1.

While the immediate effect of diesel prices getting deregulated resulted in the ‘aam aadmi’ fuel getting cheaper by Rs3.37 a litre from Saturday midnight, the impact of the hike in gas price would be seen in the long run as it will increase costs of electricity. Gradually the expenses of running power stations and fertiliser plants will go up. This, in turn, will have a spiralling impact on inflation.

Though there would be an increase in CNG prices, industry sources told The Pioneer that as the new gas price regime will be applicable only from November 1, 2014, calculations will be made to decide the quantum of hike.

Every dollar increase in gas price will lead to a Rs1,370 per tonne rise in urea production cost and a 45 paise per unit increase in electricity tariff (for just the 7 per cent of the nation’s power generation capacity based on gas).The Union Cabinet also approved a modified Direct Benefit Transfer for LPG scheme (DBTL), which will be re-launched in 54 districts from mid-November and in rest of country from January 1, 2015.

Announcing these decisions soon after the Cabinet meeting, which was chaired by Prime Minister Narendra Modi on Saturday evening, Finance Minister Arun Jaitley said that deregulation of diesel prices has happened at a time when global oil prices are at their lowest and therefore diesel prices too have been cut by Rs 3.37 per litre. He, in fact, asked Indian Oil Corporation Chairman B Ashok, who was also present in the media briefing, to announce the diesel price cut.

This is the first reduction in diesel rates in over five years. Diesel rates were last cut on January 29, 2009 when they were reduced by Rs 2 a litre to Rs 30.86.

Diesel prices were last raised by 50 paisa on September 1 and they have cumulatively risen by Rs 11.81 per litre in 19 instalments since January 2013, when the then UPA Government had decided to hike the common man’s fuel price by 50 paise every month till the time the subsidy burden got reduced.Due to this, petrol prices have moved in tandem with global cost and retail rates being reduced on five occasions since August on falling oil rates. Petrol prices have cumulative come down by close to Rs 7 per litre in last two-and-half months.

Also on diesel, the entire under-recovery or loss has been eliminated and oil firms started making profit from second half of September. The over-recovery or profit has since reached Rs 3.56 per litre.Deregulation would mean that the Government and State-owned explorers including Oil and Natural Gas Corp (ONGC) are no longer subsidising diesel.

Meanwhile by hiking the natural gas price to $5.61 per mmBtu from the existing $4.2 per mmBtu, the Cabinet has modified the Rangarajan formula which had been approved by the previous UPA Government.The Rangarajan formula had suggested hiking gas price to $8.4 per mmBtu (which was to be implemented by April 1, 2014), thus doubling it. However Jaitley informed mediapersons that the NDA Government had set up a Committee of Secretaries, on whose recommendations the Cabinet okayed the price of $5.61 per mmBtu.

“The price was cleared by the Cabinet, keeping in mind that there is sufficient incentive for drilling and at the same time, it is not burdensome to the customer,” the Finance Minister said.The new formula will be effective from November 1 and rates will be revised every six months with the next revision being on April 1.

Mukesh Ambani-led Reliance Industries Ltd (RIL), however, will continue to get the existing rate of $4.2 per mmBtu till it makes up for shortfall in output from KG-D6 block. Consumers though will pay the revised increased price. RIL will get the higher rates if it is legally able to prove that it did not deliberately cut production and output fall was a result of geological reasons as it claims.

Jaitley had budgeted Rs 63,400 crore for petroleum subsidies which was 25 per cent lower than previous fiscal. But unlike past, the subsidy bill is unlikely to overshoot the budgeted amount due to fall in oil rates.

The salient feature of the modified DBTL scheme is that the subsidy per domestic subsidised cylinder shall be fixed. Also all LPG consumers who join the modified DBTL scheme in future can receive LPG cash subsidy either by linking Aadhaar number to the LPG and bank database as the primary option, or directly in their bank accounts without necessarily linking it with the use of Aadhaar as the secondary option.

This will ensure that no consumer is denied LPG subsidy for want of Aadhaar number.All LPG consumers who had already joined the scheme solely based on Aadhaar number will start getting subsidy in their Aadhaar linked bank accounts after scheme is launched.LPG consumers will get a grace period of three months during which consumers who have joined the scheme will get subsidy in bank account and others will continue to get cylinders at subsidised price.

Those consumers, who don’t join the scheme after the three-month grace period, will be eligible for an additional subsidy Parking Period of three months. During this period, LPG cylinders to all such consumers will be supplied at market price, but the subsidy due on all LPG supplies will be credited to the bank account as soon as consumer joins the scheme in this period and as per entitlement.

The Cabinet also approved the framework of an inter-governmental MoU for setting up an $85.21 million joint venture firm for equipping two fully-constructed berths in Iran’s Chahbahar port.Chahbahar port is located in Sistan-Baluchistan Province on Iran’s south-eastern coast and is of great strategic utility for India. It lies outside the Persian Gulf and is easily accessed from India’s western coast.

India’s presence at the Chahbahar port would give it a sea-land access route into Afghanistan through Iran’s eastern borders, an official statement said.As per the framework, approved in the Cabinet on Saturday, an Indian joint venture company would lease two fully constructed berths in Chahbahar port’s Phase-I project for a period of ten years, which could be renewed by “mutual agreement”.

“The JV company will invest $85.21 million for equipping the two berths within 12 months as a container terminal and the second as a multi-purpose cargo terminal,” it said.The Indian side will transfer ownership of the equipment to be provided through the investment to Iran’s port and Maritime Organisation (P&MO) without any payment at the end of the tenth year.

“The Indian side can form a JV that could include one or more Iranian companies subject to the approval of the P&MO,” it said.

TOUGH CALLS

•  While fixing the natural gas price at $5.61 per mmBtu, the Cabinet has modified the Rangarajan formula approved by the previous UPA Government
•  The Rangarajan formula had suggested hiking gas price to $8.4 per mmBtu from existing $4.2 per mmBtu
•  Mukesh Ambani-led RIL, however, will continue to get the existing rate of $4.2 per mmBtu till it makes up for shortfall in output from KG-D6 block
•  The salient feature of the modified DBTL scheme is that the subsidy per domestic subsidised cylinder shall be fixed
•  Also all LPG consumers who join the modified DBTL scheme in future can receive LPG cash subsidy either by linking Aadhaar number or directly in their bank accounts without necessarily linking it with Aadhaar
•  The Cabinet also approved the framework of an inter-governmental MoU for setting up an $85.21 million joint venture firm for equipping two fully-constructed berths in Iran’s Chahbahar port

5881 - Government deregulates diesel; prices to be linked to market - Economic Times

Government deregulates diesel; prices to be linked to market

ET Bureau Oct 19, 2014, 04.49AM IST

NEW DELHI: The government announced its biggest reform yet as it decontrolled diesel, which will immediately become cheaper by Rs 3.35 a litre, raised gas prices to $5.61 a unit from next month and said cooking gas customers in 54 districts will get subsidy in their bank accounts from next month even if they do not have an Aadhaar card.

The gas price is based on a new formula that excludes costly LNG prices from the calculation, making the increase 75% lower than the price from the Rangarajan formula, which would have doubled the rate to $8.4 per unit. The UPA regime had cleared the Rangarajan price but the Election Commission had blocked it. The government also announced a premium, to be calculated later, on the price of gas from future discoveries in challenging areas like deep-water, and highpressure or high-temperature zones.

Oil minister Dharmendra Pradhan said Reliance Industries will still get the current rate of $4.2 per unit from its producing fields in the KG-D6 block because the company is in arbitration with the government. "Customers of KG-D6 gas will have to pay the new price. But the operator will get the old price for their gas, which is $4.2 per unit. The difference will be kept in a gas pool account operated by Gail India until arbitration is over," Pradhan said.

The long-awaited reform in diesel prices, which will make the fuel cheaper for the first time in five years, along with renewed efforts to target cooking gas subsidy, will help control the subsidy burden, help finance minister Arun Jaitley control the fiscal deficit and catalyse the fuel retailing sector, where Reliance Industries, Essar Oil and Shell India will challenge the near-monopoly of state-run firms in the sector.

The price of natural gas, currently $4.2 a unit, has been increased by a much smaller extent than the UPA government's unimplemented decision to double it to $8.4 per unit. Prices will be revised once in six months. The new price is in the range of what the power ministry had sought but below what the exploration industry deems attractive to spend big money in the hunt for new fields.

Essar Oil welcomed the deregulation of diesel. LK Gupta, MD & CEO, Essar Oil, said: " We welcome the government's decision to deregulate diesel. This will not only help in controlling the fiscal deficit, but also be advantageous for consumers as they will now pay market rates for the fuel which is lower by more than Rs 3 per litre . This will also leave more money with upstream companies for investment in exploration & production, thereby enhancing our efforts for energy security for the country." The hike in natural gas price will raise compressed natural gas (CNG) used in automobiles by Rs 4.25 per unit in Delhi and piped natural gas (PNG) by Rs 2.6 per unit.