lpg subsidy issue

CITIZEN SPEAK - INDIA

© Kanwal Jit Singh, Pune, India Email [email protected]

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LPG Subsidy - One Issue: I show you Rs. 35 crores, Mr. PM

The Prime Minister has made an appeal to people to give up subsidy on LPG. My

appeal to the PM is to locate these funds first that the Oil Marketing Companies

have garnered and are adding to the budgetary and inflation woes to the country.

Sounds laughable – yes it does until you read to the end of this short article. And

there are more areas, besides this - But first this.

Some facts about LPG

LPG is a gas at room temperature, but for all commercial purposes, it is traded in

the Liquid form. Therefore the decision making process of the bureaucrats in the

Ministry of Petroleum and Natural Gas, Petroleum Planning & Analysis Cell (PPAC)

and the Oil Marketing Companies is done for the liquid form alone. This leads to

certain issues being swept under the carpet. CAG Audit also does not consider this

aspect while performing the performance audit of the OMCs – Report 14 of 2014. It

has been tabled before the Parliament on July 18, 2014.

Is your LPG Cylinder really empty when you exchange it for a filled Cylinder?

No! There is some gas still left in the cylinder, even after your best efforts in

shaking they cylinder, laying it on the floor, etc. The question is how much gas

remains and why does it remain there.

Why does gas remain in the cylinder?

School level physics and every day experience tells us that gas moves from high

pressure to low pressure area, until the pressure in the two areas is equal. Now in

the case of the LPG in the Cylinder – there is another variable. This is the regulator.

The regulator has been designed to permit flow of LPG from the cylinder (which is

at a very pressure) to your kitchen stove, at a uniform pressure to enable safe

cooking. Now the regulator permits the flow of gas at a pressure of 30 millibars

above the atmospheric pressure (1 bar) – this is the ISI Standard for regulators.

Therefore until the pressure of the gas inside the LPG cylinder does not come down

to 1.03 bars, you will continue to receive LPG in your stove and can cook.

How much gas is it?

Again school level physics tells us that the quantity of the gas inside the cylinder is

volume of the cylinder multiplied by the density of the LPG in gaseous phase and

not in the liquid phase. Note: Density of gas changes with temperature and

pressure. We are concerned with density of LPG at 1.03 bar pressure and the

temperature of about 30oC – the ambient temperature in most homes. Although

there could be variations – but this is a reasonable mean.

Another alternative is the conversion factor used for billing for LPG usage in a

reticulated system. Reticulated System is that where LPG is supplied to

households, generally in multi-storeyed flats through pipelines. I am being billed at



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2.36 kg/m3 – although I am contesting this and have filed an RTI in August 2013 –

and am still awaiting the information, despite the orders of the CIC.

The volume of an LPG Cylinder is 33.3 litres in which 14.2 kg of LPG is delivered to

the homes for domestic use. This is the standard design and used by all OMCs.

Considering this information, we have 33.3 litres x 2. 36 kg/ m3 gives us 78.6

gms. That means 78.6 gms of LPG is being returned to the OMC when an “empty”

cylinder is being exchanged for a filled one or 0.554% of the LPG supplied is being

returned to the gas company – for which OMCs are charging in excess, when they

collect full money on the filled LPG Cylinder.

Thus, the consumers and government (subsidy and under recoveries) are paying for

14.2 kg of LPG, while you have returned 0.0786 kg to the gas company.

SCALE THIS FIGURE TO THE NATIONAL LEVEL

Now let us add up this value for all the LPG cylinders that have been exchanged in

a year and we get some interesting results.

Thus the OMC is filling in 14.1214 kgs and charging for 14.2 kgs. Is this not a

fraud on the consumer and the budgetary support that it gets through subsidy and

under recoveries?

What is this figure when we aggregate this up?

For this purposes, data will be taken from the Report of the Expert Group to Advise

Pricing Methodology of Diesel, Domestic LPG and PDS Kerosene of October 2013.

This has been obtained from PPAC website.

Please note: All calculations are for domestic 14.2 LPG Cylinder.

Table 1: Conversion Factors

Sr No. Aspect Conversion Factor

1 Quantity of LPG remaining in an “empty” cylinder as a % of 14.2 – the rated capacity

0.554%

2 No. of Cylinders filled by 1 TMT of LPG 70,422.54 cylinders

Table 2: Price data from Expert Group Report

Sr. No. Data Point Value

Values per 14.2 Domestic LPG Cylinder

3 Price of cylinder without subsidy 2012-13 Rs. 943.36

4 Subsidy + Under Recoveries 2012-13 Rs. 555.44

5 Price paid by consumer 2012-13 Rs. 387.91

Values per kg of Domestic LPG

6 Price of cylinder without subsidy 2012-13 Rs. 66.43

7 Subsidy + Under Recoveries 2012-13 Rs. 39.11

8 Price paid by consumer 2012-13 Rs. 27.32



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Table 3: Consumption Data for 2012-13 from Expert Group Report and

working thereon

Sr. No Particulars Value Units

1 Total Consumption of LPG in India in 2012-13 15,603 TMT

2 Consumption by Domestic Household Sector 87%

3 Consumption of LPG by Domestic Household 13,575 TMT

4 Consumption of LPG by Domestic Household 95,59,58,451 Cylinders

5 Quantity of LPG less filled by OMCs since it was already in the “empty” Cylinder

7,51,38,334 Kgs

6 Amount excess paid by consumers 14,45,52,979 Rs

7 Subsidy and Under Recovery overcharges 20,69,76,971 Rs

8 Value of Excess Money collected by OMCs 35,15,29,949 Rs

The balance 13% would comprise of auto LPG and in other commercial cylinders.

The data of which is not available, hence not considered.

So dear PM, please collect this money from the OMCs and put it to good use, before

I give up my subsidy. And there are other areas, which I shall discuss in the

subsequent posts.

Suggested Use of this Money

1. The CSR requirements of the OMCs should be in addition to this amount.

2. A separate fund should be created into which these monies are parked – the

use is overseen by a committee

3. These funds are used for health sector in the rural areas, or rural

infrastructure.

lpg subsidy issue

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