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.
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.
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