Budget suggestion: Why to collect full price of LPG cylinder and then to refund subsidy? People residing in pucca houses and having income above some limit should be disable from claiming subsidy.

[CA DEV KUMAR KOTHARI]

Earlier article:

Why subsidy to consumer of twelve gas cylinders in a year?

In the above article which was webhosted on January 30, 2015 the author had expressed views that there is no justification of giving subsidy or subsidised LPG  for cooking to many of consumers of such LPG. The author had also expressed that consumers who are not in category of poor should waive claim for subsidy.

Author had also suggested that any person who is earning salary above certain limit, and his family members should be debarred from claiming subsidy.

Why not full price:

When we pay full price for vegetables, fruits, and even drinking bottled water, then why full price of LPG cylinder should not be paid.

There is no justification for people living in pucca houses and that to in posh locality to get LPG at subsidies rates or to clam subsidy.

Full price will also result in conservation of LPG:

We can also expect that once full price of LPG is required to be borne, then people will be very careful in using LPG and save LPG. On subsidies price, people are very careless in using LPG and there is not optimum use by many of households. Even very common methods to save LPG or other fuels are not followed and there is lot of wastage. When full price will be required to be borne by consumer, it is likely that the saving will help them to reduce total cost. One advertisement in this regard is very relevant which says that just by keeping cook wares covered while cooking and use of pressure cookers can save fuels considerably.

Voluntary disclaimer will not be very popular:

In my earlier article I had appealed that one should voluntarily forego claim for subsidy. However, this may not be very popular because it is difficult, for many of us, to change very old habits of using subsidies LPG.

Why to collect full price and then refund subsidy?

There is no purpose and justification for firstly collecting full price and then refunding subsidy element to all consumers. Though the process may be simple on direct grant of subsidy refund in bank account, but more important aspect is why such process is at all required?

Identify consumers who do not deserve subsidised LPG:

In earlier article some suggestions were discussed to identify persons who do not deserve subsidies LPG.

The following category of persons can be disentitled from subsidy:

1. All persons (including family members) who resides in pucca residential houses, in any capacity like owner, tenant, family member, or in employer provided accommodation. It can be presumed that a person who resides in a pucca residential house, can afford to pay full price for LPG. However, some exceptions can be provided for suitable category of people like very old (say above 65 years of age)  retired people,  incapacitated persons, who though resides in pucca residential house have not adequate earnings.

The dealer / distributor of LPG can report about such people easily because the consumers have given their address where LPG cylinders are delivered. If such place of delivery is a pucca house, then the claim for subsidy can be disabled.

2. All persons (including two dependents) who have salary of ₹ 12,000/- per month. This can be further increased by ₹ 3000/- per dependent if number of dependents are more than 2. If a person earn more than these sums then he should not be entitled to claim subsidies LPG or refund of subsidy element.    

The above two categories of LPG consumers can be easily identified and such consumers can be made disentitled from claiming subsidy on LPG cylinders.

Earlier articles on subsidy:

In my earlier other articles also I had suggested that there should not be subsidy for consumables. Subsidy should only be for capital costs and facilities where government or public investment is essential due to high capital costs. For example, even rich people will avail infrastructure facilities made by government, at low cost or nil cost, because they cannot have own infrastructure, particularly infrastructure for use by public or community at large.

For example, subsidy on following items can be preferred or avoided:

Area where subsidy can be preferred	Area where subsidy should be avoided
Construction of houses.	Electricity in houses.
Subsidy or reduced government levies on capital assets like pressure cooker, power saving devices - plant and machinery and equipment.	Use of power and fuels like LPG, kerosene, diesel,
Books for libraries and poor students.	Consumables like stationary for students.
Subsidy or reduced government levies on vehicles to be used for public transport, vehicles in remote area,	Transport subsidy or subsidy on diesel and petrol.

Discussions to this article

[Suresh Hanamshet]

IF SUBSIDY IS TO BE STOPPED, THEN WHY M.Ps, M.LAs, MINISTERS, AND PEOPLE CONTESTING ELECTIONS WHO DECLARE ASSETS WORTH CRORES AND INCREASE THEIR ASSETS MORE THAN DOUBLE GET FREE TELEPHONES, FREE RAIL, AIR TRAVEL AND MANY MORE BENEFITS IN ADDITION TO SALARY WHICH THEY INCREASE WITHOUT APPOINTING PAY COMMISSION?. DOES THE INCOME TAX DEPARTMENT ASCERTAIN WHETHER THEY PAY INCOME TAX AND WEALTH TAX ON THESE DECLARED ASSETS AND WHETHER THESE FREE PERKS VALUE IS ADDED TO THEIR INCOME AND TDS IS DEDUCTED AT SOURCE? THIS WILL BE NECESSARY BEFORE LPG SUBSIDY TO COMMON MAN IS STOPPED.

[DEV KUMAR KOTHARI]

If my suggestion is implemented, the subsidy on LPG to people referred to by Shri Suresh Hanamshet will also be stopped. Same and similar criterion for other subsidies can also be applied.

There is no justification to give subsidy or reservations to a child of senior officer merely because they belong to SC/ ST. Once a person has attained a level in status, and economic condition, there should not be subsidy to his family members merely because he belongs to a backward class or back ward area or merely because he was at some time poor person.

Subsidies must be based on real economic condition.

We know that even domestic helps are earning much higher (about ₹ 4000 - 10000 per mont) than people belonging to poor class ( as defined for some purposes - earning rs. 350 - 700 PM ). However, many of them obtain certificate from councilors or MLA that his / her monthly income is less than Rs. 350 /500 to get free treatment in government hospital.

So the definition of poor and needy must be corrected and criterion for subsidy must be rationalised.

[Suresh Hanamshet]

IF One's real income is to be known then all credit and debit transactions have to be through a credit and debit card and not by cash. For this purpose you may have to do away use of currency which I had suggested to the Prime Minister on twitter. If this is implemented then all corruption and tax evasions will come to an end. There will be no generation of black money also.