The government’s move effectively sets cooking gas prices on a free float without any regulation.

The decision to cap the number of subsidised gas cylinders per connection from public sector oil companies has finally been made. But people, who for years were fed on the idea that cooking gas is the “friendly fuel” of the future, and had enthusiastically taken to it, are now being told to pay up a multiple of what they are now paying.

And, naturally, they are upset because the increase in the fuel budget comes at a time when lives are being squeezed by rampant all-round inflation.

Ask Malleswaram resident Dhanalakshmi Gnanesh, whose household includes two aged dependents and three children, if six cylinders can cover her annual cooking gas needs, and she snaps: “These numbers are not fixed based on the consumption patterns of a ‘real’ family.” Her family, subsisting on monthly income of Rs. 25,000, consumes at least one cylinder a month.

Connection cancelled

When her in-laws moved in, they had two connections, but the Food and Civil Supplies “clamped down” on them last year when they discovered that both numbers shared a common electricity meter ‘RR’ number. “How can I manage with a single connection? If I buy [fuel] at market price, my monthly expenditure will go out of control,” she said. Ms. Gnanesh takes offence to the logic that the subsidy cut is because the government wants to weed out well-heeled beneficiaries who are milking the system.

While the Union government’s computations on how much gas a family actually uses may fit the bill in the case of nuclear families, predominantly an urban phenomenon, in joint families or even small families with dependents, the curtailed allotment is a cruel joke. Moreover, in non-urban areas or even smaller cities, where LPG distribution is marred by delayed delivery of cylinders, the cap is likely to worsen the situation.

Picking up the tab?

Thus far, subsidy on cooking gas has been universal, unlike the public distribution system (PDS) and other targeted schemes. A few State governments have proposed to pick up the tab for BPL (below poverty line) households; Karnataka is reportedly mulling over this too.

Karnataka has 74,84,000 domestic connections and 531 distributors, according to Ministry of Petroleum and Natural Gas figures for 2011.

Last week’s announcement is effective starting this year, which means consumers will only be eligible for three connections (starting July). Any cylinder over the subsidised quota will have to be purchased at the market price, which oil companies will notify at the beginning of every month.

Volatile world market

This price will be — like petrol prices are — linked to the volatile world petroleum market. A good indicator of what this price range will be is the current price of commercial LPG, used in hotels and industries. In April, hoteliers protested, seeking State intervention when the price of the 19-kg cylinder reached an “all-time high” of Rs. 1,856 per cylinder. The average price in 2010 hovered around Rs. 1,050 per cylinder; in 2011 it rose to about Rs. 1,200.

Going by these trends, the 14.2-kg cylinder (for domestic use) is likely to cost between Rs. 750 and Rs. 1,000, sources said. Justifying the cap, the government argues that the move is aimed at controlling the oil companies’ “under-recoveries”, a curious term that remains mired in controversy.

Industry sources told The Hindu that the oil companies have tracked consumption pattern in the transparency portals to find that a cylinder lasts for more than three months for those below the poverty line as “they use it judiciously and only for cooking purposes”. “It will not affect low income groups,” the sources added.

However, consumer activists argue that the study and its methodology are suspect, mainly because it has been conducted in a unilateral manner by oil companies to benefit financially. That this could potentially unleash a thriving black market in LPG is another criticism.

Alternatives to cuts

Critics argue that there are several other ways to curb diversion. Examples such as plugging PDS leakage in Chhattisgarh using GPS-enabled systems prove that technology can provide a solution.

In Bangalore too, official sources concede that domestic LPG diversion for commercial use has reduced to nearly five to eight per cent of the total supply after oil companies introduced IVRS (Interactive Voice Response System) for bookings.

Another successful Food and Civil Supplies’ initiative was the drive to weed out bogus connections by linking the LPG consumer number to the electricity meter ‘RR’ number and ration card (in rural areas). With this, 16 lakh illegal connections of the 80 lakh connections in the State were cancelled, said B.A. Harish Gowda, Principal Secretary of the department. In Bangalore, 4.4 lakh of the 22.9 lakh connections were cancelled.

Counterproductive?

The government has for long been harping on the need to get people to move away from more polluting fuels such as kerosene and firewood. A celebrated statistic in the 2011 Census was LPG use increased from 11 to 29 per cent households. Year-wise government statistics record that LPG consumers grew from 891 lakh to 1,269 lakh consumers from 2005 to 2011.

The government’s move, which effectively sets cooking gas prices on a free float, without any regulation, is widely seen as hitting consumers hard. And, because consumers are likely to face periodic price increases, the bitterness will not go away soon.