Oil firms introduce colour-coded LPG cylinders to check misuse

Oil firms introduce colour-coded LPG cylinders to check misuse
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First Published: Fri, May 11 2007. 12 01 AM IST
Updated: Fri, May 11 2007. 12 01 AM IST
Taking a cue from kerosene, oil marketing companies have introduced colour coding to differentiate between domestic and commercial liquefied petroleum gas (LPG) cylinders to try and check diversion of domestic gas cylinders for commercial use.
The non-commercial LPG cylinders will come in Oxford blue, with a four-inch red band in the middle of the cylinder. All the cylinders previously used to be red.
While a domestic cylinder is available at around Rs296 for a 14.2kg container, a commercial cylinder is priced at Rs775.30 for a 19kg container in Delhi. That puts the per kg price of domestic gas at less than half the price of commercial gas. The government subsidizes each domestic LPG cylinder connection by Rs177 and the subsidy on domestic LPG is available to all users, irrespective of their economic status.
The price difference encourages the diversion of domestic cylinders to commercial users such as hotels, restaurants and the automotive sector.
“We have already introduced the colour coding of LPG cylinders,” said a senior petroleum and natural gas ministry official who did not want to be identified.
“We have slowly started seeing the desired effects to stop diversion due to the introduction of colour coding,” an IOC spokesman said.
There are 9.46 crore LPG cylinder connections in this country, of which 99.57%, or 9.42 crore, are domestic LPG connections. The balance 4.18 lakh cylinders are non-domestic LPG cylinders.
Arvind Mahajan, executive director at accounting firm KPMG, said: “It is a step in the right direction as colour coding of cylinder makes the diversion visible. However, to make it impactful, effective enforcement is the key issue.”
The colour coding has already been introduced in the public distribution system for kerosene, which is coloured blue. This has been done as the low price of such kerosene is a temptation to divert this fuel, primarily to adulterate with diesel, which is priced much higher.
Such diversion also results in huge under-recoveries and is borne partly by the upstream and downstream oil companies.
The government also pitches in by issuing oil bonds to the companies that take such financial hits.
In 2006-07, the total under-recoveries on petrol, diesel, kerosene and domestic LPG were Rs49,387 crore. Of these, under-recovery on account of domestic LPG cylinders stood at Rs10,701 crore, or 27%. “While the consumption of LPG in the domestic market is overstated, it is understated in the commercial LPG market. The diversion means that the subsidy bill for the commercial usage is paid by the government,” Mahajan added.
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First Published: Fri, May 11 2007. 12 01 AM IST
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