Niti Aayog to replace LPG subsidy; see what may be in the offing

Government think tank Niti Aayog is working on a proposal to replace LPG subsidy with cooking subsidy in order to extend the benefits to people using piped natural gas and biofuels for cooking purposes, a top official said today. Niti Aayog Vice Chairman Rajiv Kumar said subsidy should be applicable for all fuels that are used for cooking. At present, the government extends subsidy to users of Liquefied Petroleum Gas (LPG).

"Niti Aayog is working on a proposal to replace LPG subsidy with cooking subsidy. LPG is a specific product, a subsidy should be for larger set of all products/ fuels which are used for cooking. "(For) all fuels which are used for cooking, subsidy should be applicable. Because if there are some cities where PNG (Piped Natural Gas) is used, then it is only logical that the subsidy be extended to them also," Kumar told PTI in an interview.

Kumar's comments also come against the backdrop of apprehensions in certain quarters that subsidy only for LPG users is inhibiting the adoption of clean and cheap fuels such as biofuels in rural areas and PNG in urban areas. The changes pertaining to cooking subsidy are likely to be incorporated in the draft National Energy Policy 2030. The draft was made public last year. After inter-ministerial consultations, the policy would be taken up by the Cabinet.

All LPG consumers have to buy fuel at market price. However, the government subsidises 12 cylinders of 14.2 kilogram each per household in a year by directly transferring the subsidy amount to the users' bank accounts.  Replying to queries about rising trade tensions, Kumar said the whole economy has got used to open economy framework and that the trade war, which was started by the US, would add to the turbulence.

"We are watching the situation very carefully but to say that we are worried at this time, I think will not be correct. "We are not worried simply because there is enough space for our exports to be increases. Because trade war is not directed against India not so far," Kumar said.
However, the Niti Aayog Vice Chairman that if the trade war between the US and China leads to greater turbulence, then India should be prepared for that.

There is looming threat of intensified trade war with the US imposing tariffs on products from various countries, including China, Russia and India. Some of the nations have responded back by slapping tariffs on American products. Noting that India's macro conditions are very good very strong, Kumar said, "I think, despite some sluggishness in private investments, we will surely grow at 7-7.5 per cent this fiscal year".

He said oil prices have risen but now are stable and are not rising anymore. "... When you look at six months future, prices have slightly declined, not rising that's a big comfort," he added. "I think the worst is over. Also inflation, we have seen that core inflation is higher than headline inflation. Fuel and food are not contributing to inflation, so this will also tend to weaken as supplies improve," he said. Kumar, who himself is a noted economist, admitted that a little cause of worry was that out merchandise trade exports were not rising and that invisible trade exports have not performed well.

"So, I think it is on external account that we need to do much better and there we will have a focused approach," he said.