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EGOM could consider limiting supply of subsidised LPG to every household. Based on current
under recovery of Rs267/cylinder, total LPG under-recovery is estimated at Rs266bn/year. This
could drop by Rs198.7bn (75%) if supply is limited to 6 cylinders/year.
The interim report of the task force on direct transfer of subsidies on LPG, petroleum and
kerosene had submitted its report to the Finance Minister on 5 July 2011. Regarding LPG, the
Task Force (Chairman Nandan Nilekani) discussed three phases. In phase I, a cap on
subsidised cylinders was discussed. Though this is a policy decision of the government and
not a specific recommendation, the Task Force recommended that the cap be introduced with
a robust authentication framework
The empowered group of ministers (EGOM) was expected to meet today to consider limiting
supply of subisidised LPG cylinders to 4-6 per household in a year. This meeting has now
been rescheduled.
The Task Force report mentioned above gives the dispersion of LPG cylinder consumption
(see table below). For example, 20% of LPG customers consume 4 cylinders or less in a
year, 9% consume 5 cylinders/year. On a cumulative basis for example, 40.52% of customers
consume 6 cylinders or less in a year. The country's total customer base for subsidised LPG
is estimated at 128m.
Indian Oil issued a press release yesterday annoucing a petrol price hike in which it has
declared that the current under-recovery for LPG is Rs267/cylinder (Rs18,803/tonne). Based
on this figure we estimate annual LPG under-recovery at Rs266bn.
Based on the LPG customer data provided by the Task Force and the latest under-recovery
estimate, we have calculated the LPG under-recovery for each customer class. For example,
the under-recovery from customers consuming 4 cylinders or less is Rs27.3bn/year, from 5
cylinder category it is Rs15.3bn and so on. Thus, if the supply of subsidised LPG cylinders is
going to be limited to 6 cylinders/year, we estimate the potential saving in LPG underrecovery
at Rs199bn, or a 75% drop from current levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EGOM could consider limiting supply of subsidised LPG to every household. Based on current
under recovery of Rs267/cylinder, total LPG under-recovery is estimated at Rs266bn/year. This
could drop by Rs198.7bn (75%) if supply is limited to 6 cylinders/year.
The interim report of the task force on direct transfer of subsidies on LPG, petroleum and
kerosene had submitted its report to the Finance Minister on 5 July 2011. Regarding LPG, the
Task Force (Chairman Nandan Nilekani) discussed three phases. In phase I, a cap on
subsidised cylinders was discussed. Though this is a policy decision of the government and
not a specific recommendation, the Task Force recommended that the cap be introduced with
a robust authentication framework
The empowered group of ministers (EGOM) was expected to meet today to consider limiting
supply of subisidised LPG cylinders to 4-6 per household in a year. This meeting has now
been rescheduled.
The Task Force report mentioned above gives the dispersion of LPG cylinder consumption
(see table below). For example, 20% of LPG customers consume 4 cylinders or less in a
year, 9% consume 5 cylinders/year. On a cumulative basis for example, 40.52% of customers
consume 6 cylinders or less in a year. The country's total customer base for subsidised LPG
is estimated at 128m.
Indian Oil issued a press release yesterday annoucing a petrol price hike in which it has
declared that the current under-recovery for LPG is Rs267/cylinder (Rs18,803/tonne). Based
on this figure we estimate annual LPG under-recovery at Rs266bn.
Based on the LPG customer data provided by the Task Force and the latest under-recovery
estimate, we have calculated the LPG under-recovery for each customer class. For example,
the under-recovery from customers consuming 4 cylinders or less is Rs27.3bn/year, from 5
cylinder category it is Rs15.3bn and so on. Thus, if the supply of subsidised LPG cylinders is
going to be limited to 6 cylinders/year, we estimate the potential saving in LPG underrecovery
at Rs199bn, or a 75% drop from current levels.
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