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Cabinet approves Rs 1,650 crore to add 75 lakh new Ujjwala scheme connections over 3 years

The Union Cabinet on Wednesday approved the expansion of the Pradhan Mantri Ujjwala Yojana (PMUY) in order to add 75 lakh poor households to the scheme’s beneficiary base over three years at an estimated cost of Rs 1,650 crore. The nod to PMUY expansion and the scheme of release of grant to public sector oil marketing companies (OMCs) for the same follows the government’s August 29 announcement of slashing cooking gas prices for all domestic consumers by Rs 200 per cylinder and expanding the beneficiary base of PMUY to 10.35 crore from 9.60 crore at present.

The price cut and expansion of PMUY, which came ahead of Assembly elections in five states later this year and the Lok Sabha elections next year, was described by the government as its gift to the people on the occasion of Raksha Bandhan and Onam.

The Rs 1,650 crore estimate only for the cost of connection to the new 75 lakh beneficiaries of PMUY over 2023-24, 2024-25, and 2025-26, and does not include the targeted subsidy of Rs 200 per 14.2-kg cooking gas cylinder for up to 12 refills per year. Under PMUY, cooking gas connections are issued to women members of poor households, and the connection, stove, and the first cylinder are given free of charge. The per-cylinder subsidy of Rs 200, which beneficiaries get as a bank transfer from the OMCs, is also borne by the government as the OMCs are reimbursed for it.

“Some eligible households still do not have LPG (liquefied petroleum gas) connection. This is due to multiple reasons–new households are formed every year as a result of rising population, marriages, migration, nuclearlisation of families, left over households, extremely remote locations, etc… PMUY has been widely praised as a successful social welfare scheme which has majorly contributed to the increase in LPG penetration in the country from 62% in 2016 to near saturation now,” the government said in a release on Wednesday.

As per government data, the average LPG refill rate for PMUY beneficiaries was 3.71 cylinders for financial year 2022-23 in terms of 14.2-kg cylinders. Going by the current beneficiary base of 9.6 crore, the total number of 14.2-kg cylinders consumed by PMUY consumers comes out to be 35.6 crore per year, resulting in a subsidy outgo of over Rs 7,100 crore per year, calculations show. For the targeted 10.35 crore beneficiary base, the annualised cooking gas subsidy bill, assuming the PMUY refill rate stays at 3.71 cylinders per year and subsidy remains constant Rs 200 per cylinder, would be around Rs 7,700 crore.

The government had stopped providing cooking gas subsidy in the early months of the 2020-21 fiscal, when global oil and fuel prices had crashed. Later, the subsidy was brought back, but only for poor households covered under the scheme.

While the government will bear the cost of expanding the PMUY beneficiary base and the consequent increase in subsidy outgo, it is unlikely to foot the expense for the price cut and the OMCs are expected to absorb the hit, at least for the time being, according to people in the know.

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As per The Indian Express’s analysis of current cooking gas refill rates and the total domestic consumer base, the Rs 200-per-cylinder price cut alone could cost over Rs 36,000 crore on an annualised basis, assuming refill rates remain constant and fuel retailers continue to sell LPG to households at a price that is Rs 200 lower than what they would have charged for a cylinder had the price cut not been announced.

The actual cost could be different from this estimate as there are a number of variables in the equation. These include possible over recoveries on LPG sales by fuel retailers, movement in international crude and LPG prices going ahead, and currency fluctuations. On its part, the government has not provided any estimate of the cost of the price cut.

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Even as the government was not giving any subsidy to non-PMUY consumers, it did provide a one-time grant of Rs 22,000 crore to the three OMCs last year to compensate them for selling LPG at a loss for the previous two years, which had resulted in accumulated losses of Rs 28,000 crore. The grant came at a time when the OMCs were grappling with significant losses, particularly in the fuel retail segment. However, the companies have now largely recovered from last year’s losses and industry insiders do not expect the government to be as eager to help the companies through a special financial grant.

© The Indian Express (P) Ltd

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