State subsidy on LPG cylinders not a good idea: OMCs

Oil marketing companies (OMCs) are wary of the populist step of states to increase the number of subsidised cylinders. Securing timely payment from states against sale of subsidised cylinders beyond six would be a challenge, the companies said.

According to last week’s decision, a consumer would get only six subsidised cylinders a year, at Rs 399 in the capital, and would have to pay around Rs 750 for each additional refill. But Delhi, Haryana and Assam have announced a subsidy cover for three more cylinders. Delhi Chief Minister Sheila Dixit has even hinted that the subsidy cover would be extended to all households, and not just below poverty line consumers. More Congress ruled-states such as Maharasthra, Andhra Pradesh and Rajasthan are expected to follow. The three government oil companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — together meet the country’s LPG cylinder demand. An official in an OMC said the provision of three more cylinders at subsidised costs will be a “poor model”. “States can control taxes but how will they pay subsidy to us? It will take a marathon effort to collect timely cash subsidy from different states.”

The official pointed to an earlier LPG scheme run by the Andhra Pradesh government during implementation of which the companies faced problems in securing payments from the government. The Andhra government had launched a scheme called Deepam in 1999 to distribute a million LPG connections to women in rural BPL families and had undertaken to provide the security of Rs 1,000 towards cylinder and regulator against each connection, while the beneficiary had to pay for the gas stove and tube.