Subsidies are meant to ensure that those who cannot afford certain essential goods and services are provided these at a lower price. The difference between the market price and purchase price is borne by the government. Therefore, it should also mean that those who can afford the market price actually buys it at that rate.
The recent campaign launched by the government, which exhorts the public to give up LPG subsidies, is in consonance with the above mentioned idea. Those who can afford to give up the subsidy can give it up, while someone who cannot afford it will be provided the subsidy. This is an idea that has economic and social relevance in our country. When combined with Direct Benefit Transfer, it will allow the government to prevent diversion of domestic LPG cylinders for commercial use- agents will no longer be able to divert those cylinders unavailed out of the twelve subsidised ones each consumer is eligible for, to the black market. In addition, the subsidy given up by each consumer is used to benefit someone who is currently using firewood or other inefficient and polluting source of fuel.
All this however, seems too idealistic because it is too rational and too simple. It does not consider how people actually think, as for instance, the middle class are already fed up with inflation, especially that of food items; voluntarily taking a price hike might not even cross their minds. They experienced a major disappointment through the hike in indirect taxes without any reductions in income tax (not even deductions permissible under various sections) in the 2014-15 budget. This, when contrasted with huge figures of tax foregone in tax exemptions to corporates and businesses, could make the middle class bitter. Another point of irritation is the demand by MPs to double their salaries despite the huge amounts they draw as allowances and perks they enjoy in addition to their salary. Linking someone who gave up subsidy with another customer who benefited from this is also too simple an idea, which does little to prove the governments effectiveness and earnestness.
The attempt therefore is not going to have a significant impact unless the campaign goes beyond the rational and simple emotional satisfaction of benefiting someone less fortunate. It has to be accompanied by actual government efforts in other areas as well. Broadly, reducing inflation, preventing wasteful government expenditure, raising employment and average income are essential. Specific to LPG, promoting alternatives like piped gas or solar or electric cooking devices can be considered.
Therefore, mere appearances of activity is not sufficient. It has to accompanied by actual effort if the policy is to be effective.
The recent campaign launched by the government, which exhorts the public to give up LPG subsidies, is in consonance with the above mentioned idea. Those who can afford to give up the subsidy can give it up, while someone who cannot afford it will be provided the subsidy. This is an idea that has economic and social relevance in our country. When combined with Direct Benefit Transfer, it will allow the government to prevent diversion of domestic LPG cylinders for commercial use- agents will no longer be able to divert those cylinders unavailed out of the twelve subsidised ones each consumer is eligible for, to the black market. In addition, the subsidy given up by each consumer is used to benefit someone who is currently using firewood or other inefficient and polluting source of fuel.
All this however, seems too idealistic because it is too rational and too simple. It does not consider how people actually think, as for instance, the middle class are already fed up with inflation, especially that of food items; voluntarily taking a price hike might not even cross their minds. They experienced a major disappointment through the hike in indirect taxes without any reductions in income tax (not even deductions permissible under various sections) in the 2014-15 budget. This, when contrasted with huge figures of tax foregone in tax exemptions to corporates and businesses, could make the middle class bitter. Another point of irritation is the demand by MPs to double their salaries despite the huge amounts they draw as allowances and perks they enjoy in addition to their salary. Linking someone who gave up subsidy with another customer who benefited from this is also too simple an idea, which does little to prove the governments effectiveness and earnestness.
The attempt therefore is not going to have a significant impact unless the campaign goes beyond the rational and simple emotional satisfaction of benefiting someone less fortunate. It has to be accompanied by actual government efforts in other areas as well. Broadly, reducing inflation, preventing wasteful government expenditure, raising employment and average income are essential. Specific to LPG, promoting alternatives like piped gas or solar or electric cooking devices can be considered.
Therefore, mere appearances of activity is not sufficient. It has to accompanied by actual effort if the policy is to be effective.
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