editorial:
The use of LPG cylinders subsidised for domestic consumption in commercial establishments is so rampant that it does not even raise eyebrows. Even when the authorities make some noise about it, as they did recently, everyone knows that this is just shadow-boxing. The practise has been going on for so long that commercial establishments won’t even be embarrassed to allege that they are being “victimised” if their kitchens are inspected and use of commercial cylinders effectively ensured. Of course, this diversion is not unique to Sikkim and incidentally one of the leading reasons why LPG refills for homes sell at a premium across the country. Unfortunately, instead of erecting effective safeguards against such ‘pilferage’, the policy-makers in Delhi invariably spring a price hike. While one can understand that prices and subsidies have to be worked at practical levels, the first measure should be to plug leakages so that the subsidies are enjoyed only by the targeted segment. This is an important aspect of LPG pricing because this cooking fuel has almost been forced into many homes in India through aggressive promotion and even freebies to reduce dependence on forest resources and deliver healthier kitchens. While the intent behind the promotion of LPG is well-placed and the convenience it offers universally endorsed, it will be unfair on consumers in rural areas to be told that cooking will become consistently more expensive. They will not take very lightly to it. This brings us back to the argument that the subsidies and supplies of domestic LPG can be sustained for much longer if its diversion to commercial establishments is stopped.
One of the reasons why such efforts do not deliver any long-term solutions is because these are undertaken by way of raids, a confrontational attitude, when the advisable approach will be through dialogue. The domestic LPG users also need to be roped in for support, reminded that most of the shortage suffered by them, at least in Sikkim, is not because the “VIP’s” have cornered the cylinders but because commercial kitchens are burning up the Liquefied Petroleum Gas subsidised for them.
To understand the scale of LPG subsidy, sample these figures - Oil companies absorb a loss of Rs 320 per cylinder. In the financial year 2010-11, these companies lost Rs 22,025 crore on the sale of domestic LPG. Shouldn’t the first priority then be to ensure that the subsidy is delivered on target? It is not as if commercial LPG is priced high to cushion the domestic subsidy. It is the domestic LPG which is subsidised very aggressively. Obviously, the subsidy is worked in so that cooking gas remains affordable for domestic consumers. Every cylinder diverted to commercial establishments dilutes the effectiveness of the subsidy. If the subsidised LPG was used only in homes and not diverted, the quota released [for Sikkim] would cook many more meals at home than it manages to do at present; maybe even reduce the instances of shortage during peak demand times like festivals, when both, homes and restaurants cook much more. The latest threat of crackdown on use of domestic LPG in restaurants is not the first. The exercise repeats every year and does very little to discourage the diversion. The culprit here is not the policing, but the distribution. While it is accepted that there is no way of knowing where a cylinder is headed at the time of distribution on the roadsides, all it requires to establish diversion is a comparison between the demand for commercial cylinders and the number of registered commercial establishments which have use for it. One has still not come across reference of an official effort to make even a guesstimate on how widespread this diversion is in Sikkim. All one can speculate is that it is bound to be huge. The commercial establishments might come across as the villains here, as establishments poaching on middle-class necessities, but one should not ignore the fact that they are allowed the chance to reduce their operating costs by officials and personnel who facilitate the misuse of subsidised cooking gas. It will be difficult to prove this nexus, and the advisable thing to do would be to ensure better management of the distribution network and segregating the domestic and commercial LPG supply chains. When an abuse is as rampant as in the case of LPG distribution, a crackdown becomes ineffectual because instead of setting examples it ends up penalising everyone and then the impact of public humiliation dampens out and nothing changes. The answer has to be found in the better management of LPG suppliers.
The use of LPG cylinders subsidised for domestic consumption in commercial establishments is so rampant that it does not even raise eyebrows. Even when the authorities make some noise about it, as they did recently, everyone knows that this is just shadow-boxing. The practise has been going on for so long that commercial establishments won’t even be embarrassed to allege that they are being “victimised” if their kitchens are inspected and use of commercial cylinders effectively ensured. Of course, this diversion is not unique to Sikkim and incidentally one of the leading reasons why LPG refills for homes sell at a premium across the country. Unfortunately, instead of erecting effective safeguards against such ‘pilferage’, the policy-makers in Delhi invariably spring a price hike. While one can understand that prices and subsidies have to be worked at practical levels, the first measure should be to plug leakages so that the subsidies are enjoyed only by the targeted segment. This is an important aspect of LPG pricing because this cooking fuel has almost been forced into many homes in India through aggressive promotion and even freebies to reduce dependence on forest resources and deliver healthier kitchens. While the intent behind the promotion of LPG is well-placed and the convenience it offers universally endorsed, it will be unfair on consumers in rural areas to be told that cooking will become consistently more expensive. They will not take very lightly to it. This brings us back to the argument that the subsidies and supplies of domestic LPG can be sustained for much longer if its diversion to commercial establishments is stopped.
One of the reasons why such efforts do not deliver any long-term solutions is because these are undertaken by way of raids, a confrontational attitude, when the advisable approach will be through dialogue. The domestic LPG users also need to be roped in for support, reminded that most of the shortage suffered by them, at least in Sikkim, is not because the “VIP’s” have cornered the cylinders but because commercial kitchens are burning up the Liquefied Petroleum Gas subsidised for them.
To understand the scale of LPG subsidy, sample these figures - Oil companies absorb a loss of Rs 320 per cylinder. In the financial year 2010-11, these companies lost Rs 22,025 crore on the sale of domestic LPG. Shouldn’t the first priority then be to ensure that the subsidy is delivered on target? It is not as if commercial LPG is priced high to cushion the domestic subsidy. It is the domestic LPG which is subsidised very aggressively. Obviously, the subsidy is worked in so that cooking gas remains affordable for domestic consumers. Every cylinder diverted to commercial establishments dilutes the effectiveness of the subsidy. If the subsidised LPG was used only in homes and not diverted, the quota released [for Sikkim] would cook many more meals at home than it manages to do at present; maybe even reduce the instances of shortage during peak demand times like festivals, when both, homes and restaurants cook much more. The latest threat of crackdown on use of domestic LPG in restaurants is not the first. The exercise repeats every year and does very little to discourage the diversion. The culprit here is not the policing, but the distribution. While it is accepted that there is no way of knowing where a cylinder is headed at the time of distribution on the roadsides, all it requires to establish diversion is a comparison between the demand for commercial cylinders and the number of registered commercial establishments which have use for it. One has still not come across reference of an official effort to make even a guesstimate on how widespread this diversion is in Sikkim. All one can speculate is that it is bound to be huge. The commercial establishments might come across as the villains here, as establishments poaching on middle-class necessities, but one should not ignore the fact that they are allowed the chance to reduce their operating costs by officials and personnel who facilitate the misuse of subsidised cooking gas. It will be difficult to prove this nexus, and the advisable thing to do would be to ensure better management of the distribution network and segregating the domestic and commercial LPG supply chains. When an abuse is as rampant as in the case of LPG distribution, a crackdown becomes ineffectual because instead of setting examples it ends up penalising everyone and then the impact of public humiliation dampens out and nothing changes. The answer has to be found in the better management of LPG suppliers.
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