Direct Benefit Transfer of LPG (DBTL) scheme : What it really is!

Stephen C Guite *

Filled LPG cylinders :: Pix - TSE

I. Background

The Government of India provides Liquefied Petroleum Gas (LPG) to domestic households at heavily subsidized rates in 14.2 Kg cylinders upto the prevailing cap of cylinders per annum per household. Supplies are made at the consumer through a wide distributor network of Oil Marketing Companies (OMCs). LPG cylinders from 186 bottling plants are sent to more than 13000 distributors to serve more than 16 crore households, covering more than half of the country’s population, delivering more than 30 lakh cylinders every day. All the social groups are impacted by the delivery of LPG cylinders as it is an essential commodity for almost 50% of the households (larger percentage in the urban areas).

LPG is a clean fuel and over 16 crore households use it for cooking purposes at highly subsidized rates. The total subsidy burden is Rs. 46,000/- crore for 2013-14. The fact that such a huge amount of subsidy is being provided to consumers imposing an unimaginable burden on the state exchequer, is a matter of grave concern. As this fact has not been effectively communicated to the consumers, there has been a growing sense of entitlement on part of the consumer to the subsidy. Apart from the lack of awareness of the huge subsidy burden, the pricing of domestic subsidized LPG below the market price has also led to diversion of subsidized LPG to commercial purposes, which unnecessarily adds to the subsidy burden of the exchequer.

LPG being an essential commodity, its supply and distribution has been regulated by various regulations to control the trade and illegal diversion. However, the prevention of such activities has at best been minimal, primarily due to the large scale of the LPG supply chain.

The only way to prevent this diversion is to move LPG in the supply chain at one market price so that the incentive for diversion is eliminated. This is the backdrop of the Direct Benefit Transfer of LPG scheme.

DBTL has been introduced to curb the diversion of the subsidized LPG. Under the scheme, Consumers will pay the market price for the domestic cylinder and the subsidy will be transferred directly to their bank account. This removes the incentive to divert the domestic LPG cylinders, which moved in the supply chain at almost half of their real market price. Being a popular fuel, and coupled with poor visibility of its supplies, rampant diversion took place. This could only be stopped by removing the incentive of intermediaries in the supply chain who are able to extract the difference in the subsidized price and market price. This could only be done by moving cylinders at market price till the consumer. However, subsidy is essential part of the pricing and the only way both the objectives can be met are through a direct transfer of subsidy into the bank account of the consumer.

DBTL was designed to ensure that the benefit meant for the genuine domestic customer reaches them directly and is not diverted. DBTL also ensures that precious public money is saved by eliminating diversion. Further, LPG customers who do not wish to avail the LPG subsidy can choose to Opt out of subsidy. Consumers can register and exercise this option by visiting www.MyLPG.in and accessing OMC’s portals. Around 9000 citizens have already voluntarily given up the LPG subsidy so far.

The DBTL scheme was rolled out in 291districts in the country from 1st June 2013 in six phases. The scheme covered nearly 10 crore consumers and over 3770 distributors across the three PSU Oil Marketing Companies. The DBTL scheme launched earlier required the LPG consumer to mandatorily have an Aadhaar number for availing LPG subsidy.

The Government has comprehensively reviewed the scheme and after examining the difficulties faced by the consumer substantively modified the scheme prior to launch. The modified scheme has been re-launched in 54 districts on 15.11.2014 in the 1st phase and in the rest of the country on 01.01.2015. This not only will prevent diversion but also will allow us to detect duplicate connections against the same individual.

Under the modified scheme, in effect now, each LPG consumer will link his Aadhaar number in the LPG database and in the bank account database, and then the subsidy will be routed to the individual bank accounts in accordance with the delivery of LPG cylinders.

Alternatively, the LPG consumers who do not have Aadhaar number can also get subsidy into their bank account by simply linking their Bank Account with their LPG database. This becomes the easiest & simplest way for enrolment into the scheme.

Following are the key objectives of the scheme:
1) Remove incentive for diversion
2) Protect entitlement and ensure subsidy to the consumer
3) Improve the availability/delivery of LPG cylinders for genuine users
4) Weed out fake/duplicate connections
5) Allow Self Selection in subsidy

II. BENEFITS of DBTL scheme
Government of India
a) Will reduce subsidy burden due to elimination of supply chain leakages and unauthorized usage
b) Allow consumers to opt out of subsidy
c) Reduction in multiple connections by way of Aadhaar based De-duplication
d) Improvement in public service delivery

LPG Consumers
a) LPG Consumers get LPG subsidy in cash directly in their bank account automatically
b) With removal of incentive for diversion, the entitlement will be protected
c) Improved availability of new LPG connections in the market
d) Reduction in back-log due to reduced diversion

Oil Marketing Companies (OMCs)
a) Reduction in administrative overheads due to Lesser policing
b) Reduction in number of grievances related to unauthorized usage, diversion and delayed deliveries
c) Public auditing of Subsidy
d) Allow focus on consumer relationship management
e) Improved quality of consumer database which can be leveraged for better data mining leading to improved services
f) Removal of multiple connections / fake & ghost LPG consumers
g) Reduction in product shortage and better management of imports

Pricing under DBTL scheme

In the districts where DBTL scheme has been launched, domestic LPG cylinders will be sold to those domestic LPG consumers who have joined the scheme (CTC consumer) at Market Determined Price (does not include subsidy) from the date of launch of the scheme.

III. How does a consumer join DBTL Scheme to receive subsidy in his account?

Under the DBTL scheme, the LPG consumer can receive subsidy in his bank account by two methods. Such a consumer will be called CTC (Cash Transfer Compliant) once he joins the scheme and is ready to receive subsidy in the bank account.

There are two options for the consumer to become CTC in the order of preference given below:
Option I (Primary) – Wherever Aadhaar number is available it will remain the medium of cash transfer. Thus, an LPG consumer who has an Aadhaar Number has to link it to the bank account number and to the LPG consumer number. This is the preferred option and is to be used if someone possesses an Aadhaar number.

Option II (Secondary) – If LPG consumer does not have an Aadhaar number, then he can directly receive subsidy in his bank account without the use of Aadhaar number. In this option, either consumer can:
i. Present bank account information (bank account holder name /account number /IFSC code) to the LPG distributor for capture in LPG database,
OR
ii. Present LPG consumer information (17 digit LPG consumer ID) to his bank

Detailed description of Option – I - Aadhaar based cash transfer
This option is applicable for those LPG consumers who have their Aadhaar number available. To start receiving the subsidy directly into their bank account they need to link their Aadhaar number to their:
a. Consumer Number with the LPG distributor of the Oil Marketing Company
b. Bank account

There are two forms to be filled in and submitted by the LPG consumers for joining the DBTL scheme.
Form-1 is to be submitted at the bank.
Form-2 is to be submitted at the LPG distributorship.

Both these forms are available with the distributor as well as hosted at http://petroleum.nic.in/dbt/forms.html. Consumers can also download these forms by accessing their OMC’s individual portal through www.myLPG.in.

Detailed description of Option – II - Non-Aadhaar based Process

This option is applicable only for those LPG consumers who do not have their Aadhaar number. To start receiving the subsidy directly into their bank account the LPG consumers can either:
1. Present bank account information (bank account holder name /account number /IFSC code) in Form 4 to the LPG distributor for capture in LPG database,
OR
2. Present LPG consumer information (17 digit LPG consumer ID) in Form 3 to his bank

Form 3 & 4 are available with the LPG distributors and Banks as well as hosted at http://petroleum.nic.in/dbt/forms.html. Consumer can also download these forms by accessing their individual OMC’s portals through www.myLPG.in.
The consumers who don’t have Aadhaar number and thus become CTC using Non-Aadhaar based mechanism i.e. Bank based are called Bank-CTC or simply BTC consumers. The steps of linking bank account with LPG database are given as under:
1) Method 1: Consumers to submit their bank account details:
By Hand: Fill Form 4 and submit at the LPG distributorship. LPG distributor will provide the acknowledgement of the receipt of the form to the consumer. OR
On Web: Log on to the respective OMC’s portal through www.MyLPG.in and enter bank account details.
OR
2) Method 2: Submit their LPG Consumer ID details in Form 3 to their bank branch

Process of submission of Form 4 - By Hand at LPG distributorship
a) The consumer to fill up the details in the form.
b) If downloaded from web, consumer shall take the print out of the same and fill up the details.
c) Consumer has to submit the mandate form to the distributorship along with the copy of the front page of the bank passbook and a cancelled cheque.
d) Distributor staff will feed the consumer and bank related information into a software application (developed by the OMCs for capture of the bank mandate information).
e) The consumer name as mentioned in the LPG database shall be first verified physically with that written under the bank details section of the form.
f) If the names near match then the official shall enter the form details in the software application else the form is rejected.
g) In case of rejection an e-mail and SMS shall be sent to the consumer to revisit the distributorship and submit the revised form to ensure correctness of the information.
h) In case the form is accepted by the distributorship, the distributor shall provide the consumer with the acknowledgement of the receipt of the form.
i) The data entered is sent to the NPCI which then passes on the files to the banks as per the IFSC codes.
j) The banks check the validity of the bank details such as name of account holder, account number, IFSC code, etc. and send the match results back to the NPCI.
k) These match results are then passed on to the OMCs via NPCI.
l) If the match results are negative the consumers are intimated of rejection via SMS/email and are asked to re-submit the form.
m) In case the match results are positive, the bank details are seeded into the OMCs’ database. The consumers become the BTC and are informed about the same through SMS/email.
n) Subsequent to this subsidy transfer will start based on bank account and IFSC code provided by the consumer.

Process of submission of Form 4 - Online submission
a) Consumer need to go to www.MyLPG.in, sign in on the respective OMC portal and then log on to his/her account using the login id and password
b) Once logged in, he/she would be required to click on the link ‘Join DBTL scheme’ available on the portal. As soon as he/she clicks the link, he/she will be redirected to the online mandate form (Form 4).
c) The LPG related details of the consumer shall be pre-populated in the form.
d) The consumer shall be required to fill in the details of his/her bank account (bank name, account number, IFSC code, etc.) in which he/she desires to seek the Permanent Advance and LPG subsidy.
e) All the mandatory fields shall be required to be filled by the consumer for submission of the form.
f) Once he/she fills the form, he/she shall submit the form and receive the acknowledgement through SMS/email.
g) The consumer is then required to take print out of the submitted form, sign it and submit it to the distributorship for authentication purpose along with the supporting documents i.e. a cancelled cheque and a copy of the front page of the bank passbook.
h) In this case the distributors would not be required to do any data entry.