Open Up LPG Mar­ket to Pri­vate En­ter­prise

The Economic Times - - The Edit Page -

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.

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