Business Today

Govt mulls limiting domestic LPG supply

The petroleum ministry has worked out a proposal to limit the number of LPG cylinders for each household to seven per year, to prevent large scale diversion of cooking gas.

S.P.S. Pannu | May 11, 2011 | Updated 12:47 IST

The petroleum ministry has worked out a proposal to limit the number of LPG cylinders for each household to seven per year in order to prevent large scale diversion of cooking gas for commercial use by unscrupulous dealers.

The oil companies have estimated that each 14.2 kg cylinder of LPG normally lasts a household 45 days and based on this calculation seven cylinders are considered enough to see a family through the year.

However, an examination of the records of LPG distributors of public sector companies shows that a vast number of them are taking as many as 20 to 30 cylinders per household each year, a senior petroleum ministry official told MAIL TODAY. This shows that large scale diversion of subsidised cooking gas is taking place for use in commercial establishments, such as restaurants and dhabas and as an auto fuel.

LPG for commercial use is sold at the market price and packed in different cylinders. However, the household cylinders are a common sight in restaurants and roadside eateries as well.

According to the petroleum ministry's proposal any extra LPG beyond seven cylinders that a household may require will have to be bought at the market price so that the public sector oil firms do not have to suffer any loss. The public sector oil companies are losing around Rs 350 on each cylinder sold for use in domestic kitchens at the current level of international prices and the government is keen to limit the losses.

A senior petroleum ministry official told MAIL TODAY that the final call will have to be taken by the political leadership. The issue is expected to be discussed by the empowered group of ministers (EGoM) when they meet on Wednesday to take a decision on the hike in petrol, diesel and LPG prices. Although international prices have eased in recent days, the oil companies have piled up huge losses and are still losing money on the sale of petroleum products.

He explained that the Centre wants to spread the use of LPG to cover 70 per cent of the population by 2015 from present figure of 50 per cent. However, given the current policy of subsidising the cooking gas for the entire nation is not sustainable as the oil firms would incur big losses.

The government is, therefore, thinking of excluding the higher income groups from the LPG subsidy to reduce the losses of the oil companies.

The country's 3.4 crore income tax (I-T) assessees have been identified as one category that can afford to pay the market price for cooking gas. Since there are many rich households that do not pay I-T, the exclusion criteria may also include those who own a car or a house in the city regardless of the fact whether they pay income tax or not. The petroleum ministry is of the view that the best case scenario as far as the oil firms are concerned would be to restrict the subsidised cooking fuels only to below the poverty line families.

However, this may not be politically feasible as large sections of urban workers and Class IV employees of the government may not be able to afford cooking gas when international prices skyrocket.

The petroleum ministry is pitching strongly for limiting the losses on petroleum products and has the support of the finance ministry, which is also keen on reducing the subsidy burden and checking the fiscal deficit.

Courtesy: Mail Today

  • Print
A    A   A