NEW DELHI: The Indian government on Thursday raised the subsidy on cooking gas, a populist move just months before national elections but one that will further strain the public purse.
The Cabinet agreed to raise the number of subsidised gas cylinders per home from nine to 12 a year after Rahul Gandhi, number two in the ruling Congress party, demanded the increase earlier this month to meet consumer needs.
“Today the Cabinet has taken a decision to increase it to 12 … and it will be effective from Feb. 1,” said Oil Minister Veerappa Moily at a press conference.
Asked whether Cabinet’s decision was influenced by Gandhi’s request, Information Minister Manish Tewari said: “Rahul Gandhi is an elected representative and if he says anything, it is considered very seriously.”
Tewari denied the move was aimed at winning over voters before the general election due by May, which the Congress party is almost certain to lose after a decade in power.
The move, set to cover 99 percent of Indian consumers, will cost the government 50 billion rupees ($797 million) in additional subsidies at a time of slowing economic growth, weak tax returns and high public spending. The government said last month it would stick to the “path of fiscal prudence” and vowed no pre-election handouts, dismissing market fears of expensive schemes to sway voters that would swell the deficit.
The economy grew at a decade low of five percent last year — a far cry from near-double digit expansion during India’s boom times — and the government is trying to meet its fiscal deficit target of 4.8 percent of gross domestic product in the year ending March.
The Congress-led coalition is trailing in opinion polls against the main opposition Bharatiya Janata Party, with voters disillusioned over a string of corruption scandals and the faltering economy.
Congress is also battling the rise of newcomer Aam Aadmi Party, which slashed electricity tariffs and offered households free water after coming to power in Delhi state elections late last year.
Currently, the market price of cooking gas is $20 per cylinder in Delhi while subsidised ones cost $6.