The Centre has said only six subsidised cooking gas cylinders would be available to a household in a year. Lost in the hue and cry over this move is the greater possibility of diversion of the non-subsidised domestic cylinders to commercial users.
Putting a cap on subsidised liquefied petroleum gas to a household is indeed a starting block for cutting down subsidy and also the under-recoveries of the state-owned oil marketing companies.
The question, however, is: Will this address the menace of diversion? Curbing the misuse is not just about ensuring that rule of law prevails. It is also about providing subsidy only to the eligible. Leaving the subsidised price untouched (even that went up on Sunday by nearly Rs.12 a refill as a result of an increase in cooking gas distributors’ commission), the government introduced the cap, and created a new category of non-subsidised domestic LPG cylinders.
After exhausting its quota — three subsidised cylinders in the rest of this fiscal — a household becomes eligible for unlimited non-subsidised cylinders at market rate. The government has also exempted non-subsidised domestic refills from Customs and Excise levy. This exemption is given selectively — not for LPG meant for commercial use. This has created a new situation wherein you have three different prices for the same (14.2 kg) cylinder — domestic, non-subsidised domestic and exempted category users such as government hospitals, schools, hostels and orphanages. Commercial cylinders of higher capacity, starting from 19 kg, meant for use by commercial establishments are priced higher.
With the households expected to be a lot more vigilant against diversion of the subsidised cylinders, the non-subsidised cylinders would be sought after as it would be cheaper by about Rs.30 (per kg/LPG) compared to the cost of the commercial cooking gas.
“Theoretically yes, the issue of diversion remains,” says an official of Indian Oil Corporation. In his view, however, the incentive is less now. Prior to the changes, it made more monetary sense for all those involved in the menace, be it those in the distribution chain or the customers and commercial establishments. “The price difference between subsidised and commercial cylinders is huge,” but with the recent cap, the households would not allow diversion of their subsidised cylinders. As a measure to prevent disputes, the oil companies, which have automated the bookings and posted the consumption details online, have also made it mandatory for the delivery boys to get the signature of the customers on the blue (consumer) book at the time of supply.
Yet, when it comes to the non-subsidised domestic cylinders, the threat of diversion looms because for both the exempted category and commercial establishments the pricing will be attractive. While the booking process is the same and the oil companies intend to monitor this sale too and investigate if the consumption pattern of any household shows abnormal increase, the need is for the customers to stay alert.