Open Up LPG Market to Private Enterprise
It is welcome the Centre has asked oil companies to raise domestic LPG (cooking gas) prices by .₹ 4 per cylinder every month until the entire subsidy of about .₹ 87 per cylinder is wiped out. Following the implementation of direct benefits transfer for LPG to below poverty line (BPL) households, it makes no sense to provide such consumption subsidies for the non-poor. We do need to better allocate resources, for much-needed social and physical infrastructure. Note that the amount involved in providing subsidies on household fuels is huge and rising, about .₹ 30,000 crore per annum. Subsidised kerosene, a sooty pre-modern fuel and a poor source of light, needs to be promptly replaced with aids like solar lanterns. It should hugely improve public health. We also need to revamp market design for domestic LPG, complete with norms for sharing bulky infrastructure for supply and storage. What’s required is proactive policy to have parallel marketing of LPG, instead of simply mandating the trio of public sector oil companies to monopolise and corner the market. The efficiency gains from a more competitive LPG market would be very significant indeed. It would boost entrepreneurship, step up supply and is actually likely to reduce costs and prices going forward, transparently. Piped supply of gas in towns would be cheaper than distribution via cylinders. Composite cylinders would lower costs, as compared to steel ones. The government had earlier asked the LPG retailers to revise prices by .₹ 2 per month, to gradually remove the subsidy involved. The move now is to fast-track the price revision, so as to better allocate scarce resources. The upfront subsidy distorts the market, breeds corruption and comes in the way of efficiency improvement.