India has seen a flurry of reforms over the past couple of years. To start with, the
government’s push to drive the adhaar framework for the transfer of social sector benefits
(on the lines of social security number in the US) has paid off handsomely and will continue
to deliver in the days ahead. When implemented for distribution of LPG subsidy, it helped
plug leakages and eliminate fake accounts, thus saving over Rs 50,000 crore on LPG
Moreover, voluntary renunciation of subsidy by households with income greater than Rs
10 lakh per annum has helped the government improve its LPG distribution network in the
hinterlands, thus improving productivity (in addition of goodwill, if any) of the 2 crore
housewives by replacing conventional cooking fuel like wood or charcoal with LPG and
preventing the usage of highly polluting fuel.
Application of Adhaar has opened up lots of avenues for the government to ensure that social spending reaches the target audience, contain subsidy outflow, which in turn will ensure that the resources are put to rightful use.
Diesel price deregulation in October 2014 enabled the oil marketing companies (OMCs) to raise retail prices of diesel periodically, passon the change in prices in international crude prices and recoup the losses.
Earlier, diesel was responsible for 50 per cent of the underrecoveries of the OMCs. Though OMCs were compensated for their losses by a combining subsidies from the government and governmentrun upstream oil and gas companies such as ONGC, Oil India and GAIL, there used to be uncertainty in timing and amount of subsidy disbursement, which had adversely affected cash flows of OMCs. After deregulation, finances of the OMCs improved significantly, enabling them to concentrate on capacity expansion and growth strategies. OMCs are the biggest beneficiaries of the deregulation; while the government has also benefitted as deregulation reduced subsidies, thus improving the balance sheet and enabling it to invest in productive assets and projects.
Moreover, the deregulation created a levelplaying field for private refiners, which are now in position to sell their products at par with public sector OMCs in the domestic retail market.