The Ministry of Finance has reduced the petroleum subsidy to Rs. 12,995 crore for Financial Year 2022. In the same budget, the government has said that the number of beneficiaries under the Ujjwala scheme will be increased to one crore.
The government is expecting that increasing the prices of LPG cylinders will reduce the subsidy burden on them. As per the report, the government official said that the government is moving towards abolishing subsidy. This is the reason why the prices of kerosene and LPG are continuously increasing.
One more notable thing is that there was a steady increase in the price of LPG last year also. Compared to the increase in the price of petrol, it was less. A similar situation may also be seen next year. Only retail fuel vendors revise the price of LPG cylinders. LPG depends on the international benchmark and the exchange rate of the rupee against dollar. The government sends the subsidy amount for LPG directly to the account of beneficiaries under direct benefit transfer, while kerosene is sold at a concession rate through the public distribution system.
The 15th Finance Commission report states that, after these measures, the revenue receipt through petroleum subsidy has come down from 9.1 percent in the financial year 2011-12 to financial year 2018-19. It has come down from 0.8 percent to 0.1 percent in term of GDP. At the same time, kerosene subsidy was Rs. 28,215 crore in the ear 2011-12, which has come down to Rs. 3,659 crore in the budget 2021.
The finance commission has stated in its report that the Ujjwala scheme may increase the burden of LPG subsidy but, the subsidy scheme is confined to the poorer class or can be reduced by capping the number of subsidized cylinders.
