New Delhi: The government’s move to radio-tag domestic liquid petroleum gas, or LPG, cylinders to prevent the subsidized cooking gas from being used commercially is unlikely to succeed due to high costs and sheer number of connections.
State-owned oil marketing firms sell 14.2kg LPG cylinders for Rs279.70 each to domestic consumers, while the 19kg cylinders are priced at Rs688.16 for commercial customers in Delhi. The price varies in different locations in the country depending on local levies.
Costly proposition: IOC chairman Sarthak Behuria says it will be tough to scale up radio frequency identification in the entire country. Ramesh Pathania / Mint
Marketers lose about Rs75 on each domestic cylinder, which is made good by the government. There are 104.7 million LPG connections in the country, of which 99.57% are for domestic use, according to official data.
A cylinder for commercial use, costs almost double what domestic users pay. “When you have a dual pricing of any product, there is bound to be diversion... technology solution cannot be foolproof but at least it will deter,” said Indian Oil Corp. Ltd chairman Sarthak Behuria.
He added: “RFID (radio frequency identification) has a cost, it is not cheap... This would only give some kind of fear in some people, but to scale it up for the (entire) country, in my view, is going to be difficult.”
Indian Oil is the largest LPG marketer in India, with around 51 million LPG connections, of which about 6% are commercial users.
The ministry of petroleum and natural gas had asked marketers last year to start using RFID systems—microchip-enabled tags that transmit high-frequency radio signals—on cylinders on a pilot basis from 1 April.
“Oil marketing companies should be interested in the scheme. Today... (they are) hardly bothered due to the high costs involved,” said a petroleum ministry official who didn’t want to be named.
The cost of RFID implementation could not be immediately ascertained, as government-run oil marketers were unwilling to share the information.
“Given the amount of subsidies involved, it is a positive initiative for which efforts should be put to ramp it up,” said Ravi Mahajan, partner at audit and consulting firm Ernst and Young.
In what may further aggravate the situation, LPG shortage will only get worse over the next year, and is expected to peak at 2.42 million tonnes (mt) in 2009-10, according to a report by a working group of the ministry for the 11th Plan that ends on 31 March 2012.
India consumes around 10.7mt of LPG a year, of which 8.4mt is produced locally, while the rest is imported.