ANNOUNCEMENT OF 12 SUBSIDISED CYLINDERS

• Congress vice-president Rahul Gandhi’s appeal to raise the cap on subsidised LPG cylinders could force Finance Minister P. Chidambaram to relax the expenditure ceiling his ministry had imposed on the Oil Ministry.
• If the government raises the annual cap from nine to 12, the higher subsidy outgo will force the Oil Ministry to breach the ceiling, sources said. The Ministry estimates the additional burden at nearly Rs. 7,000 crore.
• Asked for its reaction, Finance Ministry sources said they would take a call on relaxing the expenditure ceiling on receiving the Oil Ministry’s proposal.
• Under the current LPG cylinder regime, 89.2 per cent of the 15 crore LPG consumers are covered. The remaining 10 per cent buy the additional requirement at the market price.
• If the quota is raised to 12, about 97 per cent of the consumers will be covered.
• Increasing the limit to 12 cylinders is likely to result in an additional fuel subsidy burden of Rs. 3,500 -5,800 crore.
• The government already incurs an expenditure of Rs. 46,000 crore per annum as subsidy on LPG.
• In a move that is likely to hit currency hoarders and counterfeiters, the Reserve Bank of India (RBI) has decided to withdraw from circulation all currency notes issued prior to 2005.
• “The public can easily identify the notes to be withdrawn as the notes issued before 2005 do not have on them the year of printing on the reverse side,” the RBI said.
• From July 1, however, those wanting to exchange more than 10 pieces of Rs.500 and Rs.1000 notes in a bank where they do not have an account will have to provide proof of residence and identity.
• The move will flush out black money, according to bankers.
• Notes issued after 2005 have added security features that make counterfeiting difficult.
• The UPA government has formed a three-member Cabinet committee to examine the possibility of opening up agricultural land to Foreign Direct Investment (FDI), following a proposal by the Urban Development Ministry on letting foreign realtors buy agricultural land.
• The committee includes Urban Development Minister Kamal Nath, Finance Minister P. Chidambaram and Commerce and Industry Minister Anand Sharma.
• At present, FDI is banned in farm land. Further, Indian banking rules disallow loans for the purchase of farm land even for domestic investors — except in the case of large-scale projects — to safeguard against speculative land acquisition and hoarding.
• The Ministry’s argument is that as farm land is already being acquired for township development, FDI would only help raise more funds for the purpose. Real estate developers would in any case be applying for land use change after acquiring farm land, the Ministry said.