How govt wants to put LPG subsidy money in your pocket

Transferring LPG subsidy directly into consumer’s Aadhaar-linked bank account is expected to help save Rs 4,000 crore a year


Pratap Vikram Singh | October 18, 2013

As the government mandates sale of LPG cylinders at market prices across the country in a phased manner, it has put the responsibility of availing cash subsidy on consumers. A consumer will have to provide her Aadhaar number to oil marketing companies (OMCs) and banks to get the subsidy. For the transfer of cash benefit under welfare schemes, however, the onus will be on the district administration.

The government wants to put the subsidy for LPG and cash benefits of 28 welfare schemes directly into the pockets of beneficiaries. The ministries of finance (departments of financial services and expenditure) and petroleum are working intensively to resolve issues related to integration of Aadhaar, banking system and beneficiary databases.  

In a group of 20 districts, where the direct benefits transfer for LPG (or simply DBT-L) was introduced on July 1, the cylinders are now being sold at market prices. So far 25 lakh of the total 73 lakh consumers have been credited the subsidy due to them into in their bank accounts. “A total of Rs 271 crore has been transferred till now,” says S Sundareshan, mission director, direct benefits transfer (DBT). 

ALSO READ: Game has changed: DBT rollout will be messier

Another 25 lakh consumers in these districts have already been enrolled for the DBT-L and will start receiving the payment as they make their first booking. All these consumers have been made cash transfer compliant (CTC), which means that their Aadhaar numbers have been linked to the database of the OMCs and banks. The fate, however, of the remaining 23 lakh consumers is unclear as they haven’t provided their Aadhaar number either to the OMCs or banks, and have to buy the LPG cylinder at the market price.

Of course, the supreme court ruling of September 23, underlining the volunary  nature of Aadhaar, and the government response to it will make the DBT rollout even more complicated (see box, ‘Game has changed: DBT rollout will be messier’).

The government, however, does not seem to be worried. Sundareshan said at a media briefing on September 10 that about half of the 23 lakh consumers could be those from the well-off category and might have voluntarily chosen to not apply for subsidy. “Some of them might also have duplicate cards and hence would be afraid of getting caught,” he added. “As of now we haven’t received any complaints or media reports about genuine beneficiaries being left out of the DBT-L.”

According to the Unique Identification Authority of India (UIDAI), the districts selected have 96 percent Aadhaar coverage. Basing his observation on the substantial number of people who have not come forward for DBT-L in 20 districts, Sundareshan says that across India this could lead to 10-12 percent of savings, which could be to the tune of Rs 4,000 crore. There are 14 crore LPG consumers and the government spends roughly Rs 40,000 crore in LPG subsidy annually.

As the DBT is scaled to 289 districts – covering almost half of the country – in a phased manner, the consumers will have to ensure that their Aadhaar number is seeded in the banks’ and OMCs’ database within three months. “The onus lies on consumers to provide their Aadhaar to banks and to the OMCs,” says Neeraj Mittal, joint secretary, ministry of petroleum and natural gas. 


Though the cabinet committee on economic affairs (CCEA) decided to extend the DBT-L to 289 districts, the initiative faces several challenges. For one, Aadhaar generation is slow in those states where the national population register (NPR) is collecting biometrics. This also hampers the process of linking Aadhaar with bank accounts.

“The UIDAI has evolved a mechanism in which the Aadhaar number of the beneficiaries under the DBT-L and DBT will be done on a priority basis in both groups of states covered by the authority and NPR,” says AP Singh, deputy director general, UIDAI.

The progress on direct transfer of benefits on 28 schemes, which mainly relate to pensions and scholarships, has been uneven. So far 121 districts have been covered and an amount of Rs 234 crore has been transferred. [Putting together DBT and DBT-L, the government has disbursed Rs 480 crore.] But only Rs 64 crore has been routed through the Aadhaar payment bridge.

According to UIDAI officials, only 10 percent of the beneficiaries in 121 districts are CTC compliant. Given the state of affairs, the government has wisely decided to put the onus of transferring cash benefit to the eligible citizens on the district administration. The local administration, and not the beneficiaries, will have to ensure the linking of Aadhaar number with welfare schemes and the databases of banks. The slow pace of Aadhaar seeding of bank database had emerged as a major challenge in the DBT-L and DBT rollout.

The government, however, seems confident of ironing out the problems. “A lot has changed in the past two months. The Aadhaar seeding of bank accounts was just 33 percent in the initial days when DBT-L was introduced. In just a month and a half this has gone up to 52 percent. On the contrary the LPG database seeding has increased from 67 percent to 72 percent in the same period,” says Anurag Jain, joint secretary (financial inclusion), department of financial services (DFS) in the ministry of finance.

Since August, Jain has been speaking to the executive directors of all banks through video conferencing every Wednesday. Besides, the banks have started sending personalised SMSes to the account holders to provide Aadhaar for seeding. “The banks are working on Saturdays and Sundays to speed up the seeding process,” Jain says. “We are also pushing the banks to increase the number of business correspondents (BCs) on the ground.” Though the Reserve Bank of India (RBI) says that there are close to 2.2 lakh BCs across the country, the actual presence on the ground is far less.

In Jain’s view, 70 percent of the sub-service area has already been covered. The DFS will now push for increasing the BC coverage for the remaining 30 percent of the sub-service area. “This will be dealt with in another two to three months in the DBT-L districts on a priority basis,” he adds. “To speed up linking of Aadhaar with bank accounts remote Aadhaar seeding framework (RASF) has been introduced. Under this framework, customers will be given three choices of reaching to the bank for linking their account with Aadhaar: this will be via SMS, ATM or online.”

In a meeting of bankers, department of financial services and the UIDAI on September 11, the Authority said that it would offer a comprehensive tool to the bankers which could help them in speeding up the seeding process. Currently, when the banks receive the Aadhaar number of a consumer it confirms the same with the UIDAI, which replies in ‘yes’ or ‘no’. Sometimes the Aadhaar number doesn’t match with the name of the beneficiaries just because the name has been spelt in full at one place and in short in the other.

The solution provided by UIDAI is as follows. To ensure that Aadhaar number is linked to the right person, firstly banks can now request the Authority for e-Aadhaar card of the consumer, which will have the complete name, address, image, and Aadhaar number. This will be done only after a prior sanction from the consumer. While requesting the consumers to provide their Aadhaar number for seeding, the banks will ask for their approval for accessing e-Aadhaar. Secondly, in case banks are not able to access e-Aadhaar, they can punch in demographics details of the consumers along with their Aadhaar number and can accordingly figure out the right match.

Another major challenge in the DBT rollout is banking coverage. According to one estimate, there are some 65 crore banks accounts in the country. But since so many individuals have multiple bank accounts, there are no official estimates about the actual number of the people under the banking coverage. To catalyse the bank enrolment, the RBI on September 5 issued guidelines to banks to accept eKYC (electronic know-your-customer) for opening an account. This means a person with Aadhaar number can just walk into a bank with the Aadhaar card and can open a bank account. The applicant will not have to provide other identification proof to the bank. Using eKYC process, the banks can get applicant’s demographic data from the UIDAI after the applicant approves it providing her/his Aadhaar number and biometrics.

While a lot of these challenges are being dealt with in interdepartmental meetings, LM Deshmukh, deputy general manager, financial inclusion, Bank of Maharashtra, says there is need for a single agency which could bring together all concerned departments on board for the trouble-shooting of implementation challenges.

How you receive subsidy for cooking gas

  • To get subsidy cash under DBT-L the user has to make a one-time request (booking).
  • The moment a beneficiary books an LPG cylinder, an amount of Rs 435 is deposited in his account within 24 hours. When beneficiary buys the cylinder, the subsidy for another refill is deposited in his account automatically.
  • At the backend, when the first booking happens, the OMC generates a bill to the bank, which deposits the amount in the beneficiary’s account.
  • The bank then sends the transaction details upwards to the ministry, which updates the central MIS.



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