LPG campaign: OMCs turn heat on dealers

By: | Published: June 15, 2015 12:26 AM

As just a little over five lakh people have given up their LPG subsidies despite the government’s campaign...

As just a little over five lakh people have given up their LPG subsidies despite the government’s campaign, public sector oil companies have decided to turn the heat on their LPG distributors. Whether it will work is open to question, but distributors are under pressure to organise aggressive campaigns in their areas — painting competitions, road shows and even tableaux — within a week.

The three oil marketing companies — IOC, HPCL and BPCL — are providing distributors with banners and other advertising matter for the campaign. India has a total of 12.9 crore customers who have registered under the PAHAL scheme of direct cash transfers.

Chandra Prakash, general secretary of the All India LPG Distributors Federation, argues that distributors hardly have any funds to carry out such activities. There are caps on how much LPG can be sold by various types of distributors but the highest is 16,500 per month. Given the distribution margin of Rs 44 per cylinder, that’s an income of R7.3 lakh per month. For an average distributor selling, say 6-8,000 cylinders a month, once costs are accounted for, profits don’t add up to more than R1 lakh a month.

While dealers agree that subsidies should not be given to better off persons, they argue it is difficult for them to tell this to their customers. Prakash recalls that the government had initially said those earning more than R10 lakh per annum would have to buy cooking gas at market rates. Since the government later made this voluntary, dealers say it is difficult to make consumers give it up.

Even if you assume that those who have given up their subsidy use the full quota of 12 cylinders a year, at current prices, the #GiveItUp campaign has yielded a saving of just Rs 130 crore. The FY15 LPG subsidy was Rs 36,580 crore. If prices stay at current levels, and subsidies remain at Rs 208 per cylinder — and assuming 9 cylinders per family per year — FY16 subsidies will be as high as Rs 24,000 crore.

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