ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Deconstructing Government's LPG Subsidy Savings Claim

The Comptroller and Auditor General report on the implementation of PAHAL, India's ambitious direct benefit transfer for LPG scheme, debunks the government's exaggerated subsidy savings claim. To improve the efficacy of the subsidy delivery mechanism and curb diversion of subsidised domestic LPG to the black market, the government should take serious note of the recommendations made in the CAG report.

The cost to subsidise domestic liquefied petroleum gas (LPG) in India has declined since 2014 in step with the fall in international crude oil prices (Figure 1). This development coincided with the introduction of PAHAL (Pratyaksh Hanstantrit Labh), a direct benefit transfer for LPG (DBTL) scheme, by the National Democratic Alliance (NDA) government in November 2014. However, it is difficult to accurately assess the decrease in LPG subsidy cost attributed to the implementation of this scheme. The Comptroller and Auditor General (CAG) report, tabled in the Parliament in August 2016, has found “systemic problems” with the PAHAL initiative and has questioned the government’s claim of having saved more than ₹21,260 crore over the last two years in subsidy outgo for LPG (MoPNG 2016). Not surprisingly, the media has concentrated solely on the government’s savings claim,1 ignoring other aspects of the CAG report.

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