The Indian Oil Corporation has announced a “temporary” suspension of the granting of new LPG connections to households across the country. This is not, in some ways, a total surprise, coming as it does hard on the heels of the IOC’s announcement that its first-quarter profits dropped 71 per cent this year. If the oil marketing companies are expected to carry a large proportion of the burden of the worldwide increase in the price of hydrocarbons, they will naturally attempt to minimise the savaging of their bottomline. As IOC Chairman Sarthak Behuria pointed out this week, high crude prices and the consequent “under-recoveries”, to use the sector’s own quaint jargon for what are basically government-mandated losses, require them to make major changes.What he went on to say was even more illustrative. The problem in the LPG sector, where the IOC is taking action first, is not really the under-recovery per cylinder (which is “only” Rs 340); it appears that the pause is to ensure “network purification”. Translated, what this means is that far too large a fraction of LPG cylinders meant for the domestic market is being used elsewhere — to power autorickshaws and commercial establishments, for example. The proliferation of single households with multiple connections has also led to a thriving black market, one which will only grow with this announcement. This is an entirely predictable consequence of massive price differentials, and if the IOC says that a little “network purification” will solve the problem, it is fooling only itself.As the palaeolithically named Weights and Measures Division lodges FIRs against agencies siphoning off gas from cylinders, and the Central Information Commission demands that the entire list of household consumers of LPG be made public to reduce siphoning, it is clear that the entire, over-complex, irrational system of subsidies is teetering on the brink of collapse. Kerosene is used to adulterate petrol, spewing out three times as much pollution; massive losses are being made on diesel as commercial establishments continue to take advantage of subsidies meant for trucks; CNG pumps feature long lines as companies cut back. The unofficial scarcity so induced has led to increasing domestic use of un-subsidised, environmentally unfriendly coal. This is absurd, and rationing more so. The LPG Distributors’ Federation recommends raising prices by Rs 50 a quarter and an eventual phase-out of subsidies. This would be a good first step towards dismantling an unsustainable system.
