Here is FM's roadmap to solve LPG subsidy puzzle

Finance Arun Jaitley is all set to roll out a subsidy rationalization roadmap for liquefied petroleum gas (LPG) cooking cylinders in the Union Budget he will present this month.

The focus of the FM’s thrust is stopping subsidy to the “undeserving” and towards that end, he may look to eliminate subsidies for individuals that clear certain criteria: such as those falling in the 20 percent income (earning Rs 5-10 lakh) and 30 percent (Rs 10 lakh and above) tax brackets.

The Indian government, which had penciled in a total fuel subsidy of about Rs 63,000 crore for fiscal year 2014-15, arising out of sale of kerosene, LPG and diesel (which is no longer under the subsidy net since October 2014), sells LPG cylinders at about half the manufacturing cost (post subsidized) or at full price, and then reimburses the subsidy directly into consumers’ bank accounts.

The direct benefit transfer, in which customers paying full price, would get the cash LPG subsidy directly transferred into their bank accounts is also a key area of focus for the NDA government – as it prevents leakages, which can eat into the overall subsidy bill.

Moreover, FM Jaitley may provide tax incentives to companies that lay down piped cooking gas lines in order to attract more private players in the space.