12 SUBSIDISED CYLINDERS WILL BREAK FINANCE MINISTRY SPENDING CAP

Expenditure Secretary's letter requested Oil Ministry to "strictly adhere" to the Revised Expenditure ceilings for the current financial year.

Congress vice-president Rahul Gandhi’s appeal to raise the cap on subsidised LPG cylinders could force Finance Minister P. Chidambaram to relax the expenditure ceiling his ministry had imposed on the Oil Ministry.

Expenditure Secretary Ratan P. Watal, in a letter to Additional Secretary & Financial Advisor S.C. Kuntia in the Oil Ministry on December 13 accessed by The Hindu, requested it to “strictly adhere” to the Revised Expenditure ceilings for the current financial year.

To emphasise the letter’s import, the sentence — “Under no circumstances should the ceiling be breached” — is written in bold and underlined.

The letter also states that the Department of Economic Affairs had issued instructions that expenditure during January-March 2014 must not exceed 33 per cent of the RE. The ceiling for the month of March has been set at 15 per cent.

If the government raises the annual cap from nine to 12, the higher subsidy outgo will force the Oil Ministry to breach the ceiling, sources said. The Ministry estimates the additional burden at nearly Rs. 7,000 crore.

Asked for its reaction, Finance Ministry sources said they would take a call on relaxing the expenditure ceiling on receiving the Oil Ministry’s proposal.

At the AICC session here on January 17, Mr. Gandhi had appealed to Prime Minister Manmohan Singh to hike the quota of subsidised LPG cylinders from nine to 12. Within hours of this, Petroleum and Natural Gas Minister M. Veerappa Moily had announced that the Cabinet was likely to consider it.

Under the current LPG cylinder regime, 89.2 per cent of the 15 crore LPG consumers are covered. The remaining 10 per cent buy the additional requirement at the market price. If the quota is raised to 12, about 97 per cent of the consumers will be covered.

Increasing the limit to 12 cylinders is likely to result in an additional fuel subsidy burden of Rs. 3,500 -5,800 crore.

The government already incurs an expenditure of Rs. 46,000 crore per annum as subsidy on LPG. This is likely to go up to Rs. 50,000 crore with the additional subsidy burden. There is also no word on how the government will compensate oil marketing companies (OMCs) for the additional subsidy burden.