Transparent cylinders to carry unsubsidised LPG

It is the first step towards dual pricing of domestic cooking gas.

The government has taken the first step towards dual pricing of domestic liquefied petroleum gas (LPG) by allowing oil-marketing companies to sell the fuel at market prices in distinct fibreglass cylinders.

All the three government owned oil companies "" Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) "" will sell these cylinders in Bangalore, Mumbai and Pune, which have been identified as test beds for the pilot project.

"The cooking gas sold in these fibreglass cylinders will not be subsidised. The companies will have the freedom to revise the prices of the fuel every month, depending on global prices," a senior official in the petroleum ministry said.

Currently, IOC, the country's largest oil marketing company, is losing Rs 305 for every domestic cylinder it sells. A free-market price for the cylinder would be about Rs 600 at current prices.

In addition, consumers will likely have to shell out Rs 3,000 as security for each fibreglass LPG cylinder. This is nearly double the security money consumers pay for each subsidised cylinder now.

The three oil-marketing companies together plan to order 200,000 fibreglass cylinders, which would form a minuscule fraction of the over 150 million cylinders in circulation currently. An HPCL official said the cylinders would be procured through an international tender.

"We are undertaking a market survey to determine what the customer response is likely to be," said a senior official with Mumbai-based HPCL, adding the overall investments for rolling out the fibreglass cylinders were not likely to be huge as the cylinders could be bottled in the existing LPG bottling plants with some minor changes.

The fibreglass cylinders will be transparent. "This is to make sure that unscrupulous dealers do not add water in the cylinders. The cylinders are also much lighter," the oil ministry official said.

The companies are, however, circumspect about the feasibility of such a project. "It is unlikely that anyone will buy LPG at Rs 600-650 per cylinder when the subsidised fuel costs less than half of that," said a senior official with IOC.

Uncertainty over the feasibility of the project is also a reason why the oil marketing companies do not yet have a deadline to start the scheme. "It is difficult to have a time frame when we are not even sure if there is a market for freely priced LPG," an official with BPCL said.

The government has been attempting to introduce dual pricing in LPG for a few years now. It has considered subsidising the cooking fuel for consumers below the poverty line, and pricing all other LPG at market prices. The various proposals have, however, not taken off due to stiff resistance from the consumers.