Subsidies fuel LPG black market

A walk down the narrow alleys in east Delhi's Patparganj area will reveal many shacks where thousands of liquefied petroleum gas (LPG) cylinders, meant for domestic consumption, are illegally sold at nearly four times the subsidised price of the fuel. The area is only a small world in the bigger world of LPG smuggling.

"You either wait for two weeks to refill your LPG cylinder or you come to us," said Manoj Singh (name changed), who sells "at least 15 domestic cylinders per day" from his 12-by-12 foot room in one of the lanes. This, according to him and the other dealers in the thriving LPG black market, is the reason they continue to do good business.

The actual reasons, though, go well beyond the 7 per cent per year growth in demand for the fuel "" LPG demand this fiscal is expected to be around 11 million tonne, against around 10.2 million tonne last year. It is the subsidised price of LPG, which is available at around Rs 21 per kg for domestic use. LPG for industries, which is outside price control, is sold at around Rs 58 per kg, up from around Rs 36 per kg last year. 
 

FUELLING PROFITS LPG prices in Delhi    (in Rs/kg)
Domestic	20.91
Commercial	57.89
Black market	80.00

"I make at least Rs 55 to Rs 60 every kg of LPG I sell," said another black marketer, as he fits a nozzle into an empty cylinder and inverts a full 14.2 kg domestic cylinder on it to transfer the gas.

He added that he sells LPG cylinders to hotels in the area for Rs 850 per 14.2 kg cylinder.

The irony of this high-profit illegal business is that the government-controlled oil marketing companies are losing around Rs 24 for every kg of LPG they sell to genuine customers, as a result of recent high crude prices that they are not allowed to pass on to consumers.

"The black marketers make a profit of close to Rs 30 per kg of LPG they sell. The germ of the problem is in the subsidy given to domestic LPG," said a senior official with Bharat Petroleum Corporation (BPCL), who requested anonymity.

Compounding the problem is the recent shortage of LPG, which has pushed up the price of the cooking fuel in the black market from Rs 50 per kg a fortnight ago to Rs 80 per kg now.

Sarthak Behuria, the chairman of Indian Oil Corporation (IOC), the country's largest marketer of petroleum products, said a couple of weeks ago that the LPG shortfall would be met in a week, but people are still queuing up at the black marketers' shops.

Another IOC official said there is no shortage of LPG in the country, but a thriving black market is creating a shortage for genuine consumers.

The illegal sellers of LPG said it is very easy for them to procure the cylinders from the godowns of the oil marketing companies.

"Out of every 50 cylinders that come from the main Delhi godown to the local godowns, almost 40 come to us. We only have to contact the manager of the local godown," Singh said, adding that he pays Rs 2,500 every month to the policemen in the area.

There have been "many" instances when the company has sacked its godown managers on charges of illegally siphoning off domestic cylinders.

Meanwhile, with an almost 14-day waiting period for a legal LPG refill, consumers continue to drive up prices in a flourishing parallel market.