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Corporate May 18, 2012

Multiple LPG connections? Oil cos want to cut yours off

By Blog

by R Jagannathan

In psychology, it is called displaced aggression. Your boss excoriates you for a missed deadline, and you snap at your spouse when you get home, the spouse gives the kid a clout on the head, and the kid throws a stone at a passing stray. Your anger with your boss is displaced and is taken out on the dog in the end.

Something like this is happening with the oil marketing companies (OMCs) and their cooking gas customers.

Stuck with huge losses on selling subsidised liquefied petroleum gas (LPG) to households (loss per cylinder: Rs 480), the OMCs have been going around with a begging bowl to the finance minister for paying their subsidies. But the FM has no time to listen to their woes, and has shooed them away at the door.

Reuters

Smarting at this callous attitude, the OMCs are now taking it out on gas consumers. According to a report in Business Standard, Indian Oil, Hindustan Petroleum and Bharat Petroleum have been knocking off consumers who have multiple gas connections. As of end March 2012, the gas connections of 3.8 million consumers were blocked.

An oil industry official is quoted by the newspaper as saying: "With a connection getting blocked, consumers will no longer get refills. We want them to surrender such cylinders and regulators to get a refund of the security deposit and facilitate bringing new consumers under cooking gas coverage."

This act will not count as his good deed for the day, though, on the face of it, there seems to be some logic on his side. Why should anyone have two (or more) connections, when there are new consumers waiting for them? And especially when gas is subsidised by the taxpayer and oil companies have to suffer losses on this count.

True, but think whether this actually helps the OMCs in any way. If I have two gas connections, it does not mean I will be using more gas than if I have only one. Usage depends on the amount of cooking I do, and the size of my family.

Secondly, if I want more gas, I can always order a refill quicker. Having two connections, at best, saves me some anxiety over delayed refills.

But how does confiscating connections help the OMCs? Their losses do not come down, since the cylinders whacked from me go to someone else and the losses continue. On the contrary, given the fact that cylinders can always be bought in black, it will enable corruption. No money will come into the OMCs' coffers.

A better strategy for the OMCs would have been to limit the number of subsidised cylinders to, say, six a year. For the rest you pay market prices.

But this, again, will be a political decision, for which the OMCs need a nod from a spineless government. This proposal has been on the table for several years now, and no decision has been taken.

Little wonder, unhappy OMCs are just hitting out at consumers.

by Blog

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