On why the LPG subsidy is bad.....

The government of India(GOI) subsidizes upto 12 LPG Cylinders per household. This is disastrous to the Indian poor as well as the honest taxpayer due to many reasons.Here, I will try to explain how this happens...


Non subsidized LPG cylinders cost approximately INR 970.The price of Subsidized cylinder is approximately INR 430. That is a staggering INR 540 subsidy per cylinder. As most of you may know, I oppose all forms of subsidies as they are unhealthy to the economy in the long run due to the market distortions they create and my belief in the inherent inability of the government to target the subsidies in an efficient manner.


Average Household consumption of LPG Cylinders is estimated to be b/w 7 to 8 cylinders per year. I will use the conservative estimate for the purpose of this calculation.
So average subsidy intake per household= 540*7=3780...
A staggering INR 3780 in LPG Subsidies and we deride the government for bringing in the idiotic MGNREGA which we also call a Dole distribution program !!!
I agree that the MGNREGA is a stupid program, a program which has more costs than benefits, but hey- So is the GOI subsidizing LPG Consumption amongst Indian Households. Before we demand that the MGNREGA be scrapped, we need to demand a controlled yet reasonably fast abolition of LPG Subsidy.


Present MGNREGA wage rate is @ INR 174/day in Karnataka . Which means each household is getting the wages of 21.75 days without doing absolutely any work. This in my humble view is plain hypocrisy by the Indian Middle Class.

If the subsidy for 12 cylinders is taken into account, the total subsidy intake will amount to INR 6480 i.e. 37.25 days wages.....


Many of the readers might have noticed the increased sales of Gas Geysers in the Indian Market. This is the principal evidence of market distortion. Gas Cylinders are being diverted from the intended use- Cooking to other uses like water heating. Using them to fuel Cars is another non-intended use.

I suggest a cost efficient way of reduction of household subsidy. Dont give subsidies to car-owners.These users wont mind Subsidy abolition as much as the usual morcha-types..
Along with this, raise the rates of subsidized cylinders by INR 20/month. The Subsidy will be eliminated within 2 years and most people will  have factored in the increase by that point of time.

Whatever the means, the GOI should remove subsidies on LPG Consumption As Soon As Possible.

The FDI Tamasha

For the past 2 years, we consumers (well those of us who follow the news) have been watching with a certain amount of amusement- the grand tamasha of FDI (especially in Retail.)

In the Indian System, we try to do everything incrementally. We call it incremental reform. This system of  incremental reform is followed due to 2 reasons:-
a)Nobody in Indian Politics has the guts to do something which will be unpopular in the short run but is essential for economic growth and poverty alleviation-(the sustainable one, not the UPA method) i.e we do not have a politico who has the guts of  Margret Thatcher. No matter how much Modi-bhakts talk about how strong-headed their leader is, the fact is that he is just another Indian politico who wants a 'pro-poor' image- A 21'st century Indira.
b)This line of thinking has some foundations vis-a-vis Behavioral Economics. TN Ninan and Swaminathan Aiyar seem to think that this approach is much suited for a cacophonous democracy like India which is just coming out of the vice like grip of socialism.

So Instead of allowing in FDI in all sectors (Socialism has ensured that we Indians have largely ignored R&D and innovation in our attempt at giving doles to all. This necessitates FDI in most sectors if we are to compete in a globalized world.) , the government allows it in small doses.

Now coming to

Why do people oppose FDI in Multi Brand Retail?
1)The fear that the local kirana shops will shut down, rendering a lot many people jobless. This argument is extremely flawed due to the following reasons-
   a) As many if not more jobs will be created even if these kirana shops shut down. Consider the fact that due to space constraints, retail complexes like the ones Walmart usually builds is not feasible within the city. Mostly people with cars will take the effort to go to the city outskirts where such stores will plausibly come up are from the rich and upper middle class. At the same time, as our economy grows, people who used to procure from PDS will now start buying from the kiranas..yeh to accha phenomenon hey..Infact, more kirana shops will come up and these kirana shops will start using newer technology and use more efficient selling mechanisms..All in all..FDI in Retail is good... Remove APMC Act along with FDI in Retail, these companies will invest a lot of cash in creating cold storage and supply chains wrt fruits and vegetables. This will not only benefit farmers due to elimination of the APMC cartel but also consumers due to reduce prices.
    b)Many of the Indian organised retailers are suffering huge losses and low returns..Do you expect the firangis to have a magic wand?

2)The teamsters who day in and day out talk about Swadeshi and Marx. These loafers are perennially in search of an issue to fight for as they themselves are too lazy to work. Oh! how I wish I can lock these idiots up in gulags..They talk about how the government is selling the nation to foreign interests but at the same time wear the clothes and watches sent by their relatives in the west..They are hypocrites of the highest order..They deserve no respect and should be ignored as much as possible..

So the UPA first allowed it, then rolled back the decision , then due to falling investor sentiment, they allowed it again. All I can do is hope that the Swadeshi bunch ruling now doesnt roll it back now.


Now coming to FDI in Single brand retail-
UPA allowed 100% FDI in retail with a lot of conditions..I will explain the irrationality of these conditions through 1 example- 30% local sourcing norms..

Now why the hell will these cos invest so much money in creating their own stores, source 30% of raw materials from low grade un-specialized Indian suppliers , lower the quality of their products and their brand?

Thankfully the government (DIPP) is now abolishing this sourcing requirement . And as you might have guessed- the Swadeshi and Marxist loafers are crying hoarse and calling it a betrayal.
A better way to go about it would be to use an effective weapon in the government's arsenal. A weapon that would do more benefit than harm. A weapon called- TAX INCENTIVES.
Here is what I propose- An X% tax cut for X% local sourcing from the base tax rate. In a few years, these single brand retailers will start cultivating local suppliers if they find it viable.

DIPP Secretary Amitabh Kant, Are you listening?