No LPG Subsidy for HIG Households: All You Need to Know
Surrender Your LPG Subsidy if You Earn MoreThan Rs. 10 Lakh Per Year, Or it’ll be Snatched Away by the Government
Last year in December government had announced that households with a taxable income of more than Rs. 10 lakh INR won’t be eligible for LPG subsidy anymore. Though initially it had been a request made by the PM, by the end of the year it was announced formally as a directive by Petroleum Ministry. And while this move has attracted criticism and debate across the country, it can actually prove very beneficial to the nation if we and government both do their work properly to implement it.
In this article I’ve tried to explain pretty much everything about this decision: the reasons, the procedure that government will use to determine someone’s taxable income and how can you declare your income yourself using both online and offline modes. But before we dive into those details, let’s take a look at some important points:
- It’s unclear whether everyone will have to declare his/her income using HIG declaration form or only those who earn more than Rs. 10 lakh per year will have to do so. In online mode you get only one option :- option of more than Rs. 10 lakh. However, the offline form includes both options.
- At the time of writing this article the form to declare income of more than Rs. 10 lakh per month is available on the website of BharatGas
- If you want to declare your income via offline mode then you can download the form from here.
Now let’s dive into a brief overview of LPG subsidy.
What is LPG subsidy and who is eligible to get it?
Till January of 2016 every Indian household with a gas connection was eligible for 12 cylinders on a subsidized rate. Out of 16 crore 35 lakh gas connection holders in the country 14 crore 78 lakh benefit from this scheme. However, in April of last year PM Modi himself requested to HIG group of Indian residents to give up on LPG subsidy for providing clean fuel to everyone at affordable costs. The government had rolled out a full-fledged marketing campaign for this particular request, which is popularly being known as PM’s “Give It Up” campaign.
Needless to say that such a campaign is bound to attract some flak. Though PM’s campaign earned sharp criticism and remained a topic of debate for quite some time, for a large part it worked successfully. Many well-known people also came forward to do it, including Wipro Chairman Mr. Ajeem Premji’s wife, Film Director Mani Ratnam, Actor Kamal Haasan and others. By December more than 50 lakh people had given up on subsidy from their own will.
It was after this milestone that government decided to make this thing a legal boundation rather than a request. On December 28 government announced that households having a collective taxable income of more than Rs. 10 lakh won’t be eligible for the subsidy. The government, however, said that initially this will be done on a self-declaration basis. But the message was clear: If you don’t need it, give up on it voluntarily or it’ll be taken from you compulsorily.
In a nutshell, currently only those households are eligible for the subsidy which have a collective taxable income (income of husband and wife both) of less than Rs. 10 lakh INR.
How many subsidies does Indian government provide and what’s the reason behind this decision?
In India subsidy is provided on some very basic needs only, which include food, fertilizers and petroleum. Now, collective burden of these subsidies is increasing year by year. Have a look at how much subsidy has been paid out of exchequer in last two financial years:
|Subsidy||Payout during FY 2013 – 2014||Budget Estimates for FY 2014 – 2015||Revised Estimates for FY 2014 – 2015||Budget Estimates for FY 2015 – 2016|
|Food||92,000 crore||115,000 crore||122,675.81 crore||124,419 crore|
|Fertilizer||67,338.77 crore||72,970.30 crore||70,967.31 crore||72,968.56 crore|
|Petroleum||85,378.16 crore||63,426.95 crore||60,270.00 crore||30,000 crore|
|Interest||8,137.19 crore||8,312.88 crore||11,147.17 crore||14,903.42 crore|
|Other subsidies||1777.72 crore||947.49 crore||1,631.55 crore||1,520 crore|
|Total||254,631.84 crore||260,657.62 crore||266,691.84 crore||243,810.98 crore|
As you can see yourself, the subsidy bill of our country is already huge. in the past petroleum companies have paid out subsidy to the tune of Rs. 85,000 crore. When a particular payout reaches that level, it becomes imperative to ensure that it reaches right pockets only. This is where two major problems arise:
- The problem of leakages, and;
- The problem of mis-targeting.
First problem is something in which subsidies don’t reach the beneficiary due to a variety of causes like corruption, stealing etc. This problem has been addressed successfully by linking bank accounts of gas consumers to their gas connections via Aadhaar cards. In fact, the Direct Benefit Transfer scheme, or DBP scheme for short, has made its name to the Guinness Book of World Records as world’s largest direct benefit transfer scheme. Because as stated above, more than 14 crore households are receiving subsidy directly in their bank accounts under this scheme.
To further strengthen the infrastructure behind this scheme Department of Posts has also proposed Public Investment Board (PIB) to open a new “Post Bank.” Once established, that bank will handle all transactions related to DBT. The Postal Department has requested a sum of Rs. 800 crore to setup the bank, and over 40 global financial conglomerates including Barclays and World Bank have shown interest in providing their expertise to set it up. Postal Department has also shortlisted 6 consultants including PWC, Ernst & Young, McKinsey and KPMC. Once this proposal is approved by PIB, it’ll be sent to Cabinet Committee on Economic Affairs (CCEA) for final approval. If CCEA gives its nod to the project, the project will take off.
However, the problem of mis-targeting, which means providing something to those who don’t actually need it, is still remaining unsolved. So now government has taken the initiative to solve this second piece of puzzle with the help of income groups. And government’s plan for the savings also seems very reasonable – rather than using the saved money to fund the budget deficit it has decided to use that money for providing clean fuel to those who can’t afford it.
And finally there’s one more reason behind this decision. In comparison to last year, the payout of subsidy by Petroleum companies is expected to remain substantially lower than last financial year, thanks to reduced prices of oil in global markets. This presents an opportunity of lifetime for the government because money saved due to falling oil prices can be combined with money saved from subsidy, which can result in massive savings for the exchequer.
The savings collected this way can be used to provide clean fuel on affordable prices to less-privileged consumers of the country. The Petroleum Ministry has said that each person who surrenders subsidy is linked to a BPL household that doesn’t have LPG connection currently. Savings from the subsidy of that HIG person may then be used for providing a gas connection to that BPL household. This will make LPG more popular among poorer households and will decrease pollution that other forms of fuel cause currently i.e. coal, kerosene, wood etc.
Has government considered any such option earlier?
The short answer to this question is “Yes!” Mr. Jaipal Reddy, who served as Oil Minister during the regime of UPA – II, had suggested a similar proposal in July 2011. However, his plan was more stringent than the plan of current government. He had suggested that those who emerged in the list of taxpayers, owned a car, a house or a two-wheeler should buy the cooking gas on market prices. But this proposal was not implemented at the time due to strict opposition from other members within Congress and allied parties.
How much will my LPG spending increase if I give up subsidy?
The math of this question is pretty simple: You’ll end up paying Rs. 188 more on each cylinder that you buy. So this way if you take 12 cylinders per year, this will result in an annual increase of Rs. 2,200 only.
How will government find the households with taxable income of more than Rs. 10 lakh?
For initial days government has opted to trust the people as it has asked them to declare their income themselves. Most recently LPG companies have also started sending SMSes to their customers to notify them about this directive.
However, this change won’t remain voluntary for long time. Once Petroleum Ministry receives the full list of households from Income Tax Department it may compulsorily snatch the subsidy from those households. The I-T department is busy in doing the calculations and may provide the full list by end of this financial year (by April 2016).
How much will government be able to save by implementing this scheme?
By December 2015 more than 52 lakh people had surrendered their LPG subsidy. Subsidy provided on each cylinder is Rs. 184.93. Now if we calculate on a basis of 12 cylinders per year per household, the annual savings translate into a sum of Rs. 1,167 crore. As more and more people surrender their subsidy, these savings may increase significantly.
Why more people are not coming ahead to give up their subsidy?
While 5 million people giving up their subsidy voluntarily is a milestone in itself, it’s clearly not enough as there’re more than 16 crore LPG connections in our country. There’re clearly a lot more people remaining who should forgo the subsidy but are not. What’s the reason behind this reluctance?
Well, many of you may already know the answer: The reasoning that “we’re already paying a lot of taxes” is the fuel behind this reluctance. It is this set of people who’re now being bound by the government to give up their subsidy on a compulsory basis. If you too have been living with this reasoning, it’ll be better if you change your mind now.
How to declare income for this scheme?
You can do that via two methods – one method is online, while another one is offline. However, there’s a catch with online method: Currently only BharatGas is supporting this method. For offline declaration you can download the form from HP Gas website, print it and submit the filled form in gas agency from where your cylinder is supplied. On the other hand, the procedure of declaring income online is given below.
How to declare your income online?
If you’re a customer of Bharat Gas you can declare your income online in a few easy steps. Given below is the process to do it:
- First of all you’ll need to register yourself on com, which is online portal of Bharat Gas for providing various services to its users. On the other hand, if you’re a registered user then you can log in to the portal and proceed to next step.
- In next step you’ll have to provide the info that’s asked for declaring your income. This info will include your and your spouse’s PAN card numbers. Once you provide it, you’ll have to select the option saying that your income is more than Rs. 10 lakh. Keep in mind that there’s no option for households with income less than Rs. 10 lakh, so if you fall in that bracket you should avoid declaring your income this way.
- Once you select the option of more than 10 lakh annual income you’ll have to do declare that information furnished by you is correct and you’ll submit a fresh declration in case of any revision in your or your spouse’s income. To declare this point you’ll have to check its checkbox.
- When you’re done with all these steps, you can submit the form.
While initially meant to save the money spent on LPG subsidy only, this move has become the testing ground for a new model that government may soon apply to other subsidies as well. By insisting the “well-off group” of people living in the country to give up on this benefit PM Modi has successfully made this reform into a political case. Now it’ll be interesting to see if government can extend this model to other subsidies as well i.e. food and fertilizers. Much part of that success will depend upon PM’s persuasion and communication skills. But if he remains successful in implementing it across other subsidies too, it may result in substantial savings that may transform the fate of our country’s infrastructure and agriculture.
The intentions of government seem good enough behind the scheme. But its actions should also testify those intentions – it’ll have to show some serious improvement in the number of LPG connections among BPL households if it has to retain the trust of public. Hopefully it’ll be able to do so – in the meantime, we can also do our part to help it achieve its goals by giving up LPG subsidy.