15 November 2012, 02:38 PM IST
The state-run oil companies may have reported a spurt in sale of non-subsidized cooking gas cylinders after the government put a cap on subsidized ones. That is likely to be a temporary and insignificant gain. By all indications, we are set to see a even bigger rise in leakage of cooking gas subsidy than was hitherto happening. It does not take a pundit to foretell this. The leakage plan was built into the scheme of putting a cap of six cylinders per household per year. It is only that politically fearful netas and Indian bureaucrats who love creating complications cannot see this. Or, maybe they do but find it expedient to ignore.
The price difference between subsidized and non-subsidized cylinders keeps growing each month. Now the non-subsidized one costs more than double the subsidized one. Naturally, consumers would do everything they can to lay their hands on as many subsidized ones as possible. Already, the companies are reporting increased applications for new connections. Folks are splitting their households. Kids living with their parents are taking separate connections to double their quota. Siblings living together are also doing the same. People having additional house, bought as an investment or otherwise acquired, are rushing to apply for gas connection at that address even if the house is lying vacant.
The trouble is, there is no standard definition of a household or a kitchen. Is a there a legal bar on a person having more than one household? Is there a bar on one house having several households? Can't siblings, married or unmarried, cook separately and call it separate households? What defines a kitchen? Is a platform mandatory? Is regular cooking there a must? Can someone just point to a gas stove kept in a corner of any room and claim a connection calling it a kitchen? Must you have a full array of spices and provisions stacked along? Who is to adjudicate upon the disputes?
Situation is compounded by some state governments, obviously Congress-run at the prodding of Ms Sonia Gandhi, pitching in with subsidy on three additional cylinders. This they have done with their own twist. In Maharashtra, for example, this additional subsidy is only for the poor. So ration cards come into play. I am sure we will see a spurt in applications for those shameful hangovers from our socialist past if this scheme persists. Will a 85-year-old granny living with her obviously well-to-do progeny in a mansion qualify for a Below Poverty Line (BPL) card and her nine cheap gas cylinders per year if she has no income of her own?
Gas companies are rushing to plug the leakage, spending a fortune on additional manpower and software to eliminate double connections for a scheme that was supposed to save them money. The government has also put out huge advertisements, and undoubtedly more will follow, explaining the system. Wonder if expenditure on those is also counted in subsidy bill. It all is likely to be a futile exercise as consumers find ways to legally get around the cap.
Soon, I also foresee a wonderful blackmarket of subsidized cylinders. If someone and his grandparents and parents and siblings and additional houses are able to corner seven connections and a couple of BPL ration cards, they become entitled to 48 cheap cylinders in a year while they need, maybe, 12. What is to prevent them from selling the remaining to neighbours at a premium of a few hundred rupees each and make a neat bundle? So, soon we will see with cooking gas what has been happening with kerosene for ages. A nationwide scam worth thousands of crores each year.
The really funny thing is all this totally unintended. Cooking gas was never meant to be a subsidized fuel. Actually, for a number of years the oil companies sold it at a premium under the notion that mostly the well-off used it. Surplus from this and petrol used to go to Oil Pool Account that was meant to cushion the blow in case international prices of crude rose. That was when crude used to be around $10 a barrel. When crude and gas prices began rising to levels not imagined before, subsequent governments just did not have the nerve to revise the prices to reflect new costs. Thus cooking gas subsidy gradually got built into the system.
Consumers will, of course, complain if you jack up the prices suddenly now. The truth, however, is that the current levels of subsidies are unsustainable but so is the present scheme of limiting it. It would be so much better to increase the prices of all domestic cylinders by, say, Rs 50. Government can also declare that the prices would automatically be upped 5% each month until they reflect the cost price. After that, they will be adjusted as and when international gas prices change. This will prevent: (a) Consumers rushing for additional and unnecessary connections. (b) Complicated KYC formalities by dealers and consumers both. (c) Loads of record keeping about who has got how many subsidized cylinders each year (d) Leakage of subsidy to undeserving. (e) Expensive and largely futile efforts by oil companies to trace and block duplicate connections and disputes arising out of that.
It will also give consumers time to absorb the price rises and introduce an element of predictability. It will bring about real savings in subsidy. It will also enable private sector, that has been pushed out of cooking gas and all retail petroleum business by huge subsidies, to re-enter and offer consumers real choice and better service. If the government really wants to protect the poor, it could do so through Aadhar-based direct cash transfer scheme coming next year.
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