In a relief to domestic LPG consumers covered under Direct Benefit Transfer (DBT) scheme, the state government is all set waive the 4.5 per cent Value Added Tax on the purchase of cylinders soon.

The department of civil supplies has sent this proposal to Chief Minister N. Kiran Kumar Reddy, who is expected to approve it shortly. However, orders to this effect are expected to be issued only after the conclusion of the panchayat raj polls to avoid violating the election code of conduct.

This is how the government plans to compensate consumers for withdrawing its subsidy component of Rs 25 on each cylinder ever since the DBT scheme was rolled out on June 1 in the five districts of Hyderabad, Ranga Reddy, East Godavari, Chittoor and Anantapur. It will be extended to all districts from September 1, 2013.

At present, LPG consumers are paying Rs 49.50 extra on each cylinder (Rs 25 state government subsidy component + Rs 24.50 VAT).

The market price of the cylinder is 916. Oil Marketing Companies are crediting the subsidy amount of Rs 454 into the customer’s bank accounts. But consumers bear the differential amount of Rs 462, which is Rs 49.50 more than what they paid before DBT, when they used to get cylinders for Rs 412.50.

The state government has been paying the subsidy amount of Rs 25 to the OMCs since January 2010 on each domestic cylinder. However, the subsidy has been stalled with the introduction of DBT since the OMCs credit the uniform subsidy nationally and there is no provision to credit variable amounts to different states.

This has made a cylinder more expensive for DBT beneficiaries in the state. “If we waive VAT, it will result in reduction of cylinder price by Rs 25, equal to what the state government has been subsidising since 2010. We have already submitted the proposal to the government and the issue is pending with the CM. A decision on this is expected shortly,” said D. Sridhar Babu, the minister for civil supplies.