Presently LPG cylinders are being supplied to the consumers (domestic) at a subsidized rate, The subsidy at the current international price comes to Rs. 150 Per Cylinder till 30th September, With the reduction in crude oil prices its impact may get reduced somewhere in November/December, 2006. At current level of consumption this subsidy is costing Rs. 9,000/9500 crore per annum.

There is Multiple pricing system for LPG supplied to domestic and commercial/ industrial consumers, While the domestic cylinders is costing Rs. 300/- on average, the commercial cylinder is costing Rs, 750/-.This is encouraging diversion of LPG from domestic market to commercial market as there is a big difference between the prices for supplies to these two segments and therefore there is temptation to make or save money on the part of dealers and or commercial consumers respectively.

The commercial consumers are mostly ‘Dhabawalas’ or ‘Halwai’ Hoteliers etc. It is estimated that presently the diversion is almost 30 - 45% of the consumption.Most of the people taking eatables/food at Dhabas are either poor people or businessman driven by short to good profit. These Dhabawalas, Halwais and other roadside hawkers buy and use domestic cylinder instead of commercial cylinders from the supplier at black price by paying Rs. 150 to Rs. 200 per cylinder

This has many adverse impacts including generation of black money at the cost of ex-chequer. Around 4000 crores of subsidy is being financed to these Dhabawalas who Pay money over the official domestics prices. The Exchacker is deprived of:

a. Income tax money pocketed by the supplier

b. Revenue representing the difference between the commercial price of the cylinder to domestic price and the imact at the level of 45% is about Rs. 4000 corers.

It is suggested that a single price system be introduced for the supply of LPG to all consumers other than Hoteliers having a ranking of three stars and above as these hotels are already consuming LPG at the commercial price.This will amount to reducing the price of commercial cylinder from Rs. 750/- per cylinder to Rs. 400/-/Rs. 450/- and therefore the Dhabawalas will get the cylinder cheaper. At the same time it amounts to increasing the price of LPG supplied to genuine domestic consumer.

The uniformity in price should be implemented at two stages. In the first stage the price should be increased by Rs. 100/- while in the second stage it should be increase by Rs. 50/-. The second stage price should be increased only if warranted keeping in view the international price of LPG and other factors described below.

It is understood that due to the political compulsion the price of the domestic LPG is not possible to be increase on account of the ground that poor people are getting affected. It needs to be observed that the most of the people are already paying higher price for their food due to black price being offered by the supplier of these food to the dealer to the extent of Rs. 150/- to Rs. 200/- per cylinder in the whole country.

Therefore increasing the price of domestics LPG though uniform pricing system will only decrease the price of LPG consumed by Dhabawalas etc. and there will be saving of Rs. 50/- to Rs. 100 to The Dhabawalas Etc. where only poor people take the food and eatables in this process their food and eatables in this process their food should become cheaper and the concerned political parties should take note of this as majority of the poor people gets benefit of this uniform price.

The above uniform system will have the following ramifications :

1. There will be reduction in price of the whole lot of Dhabawalas, Halwias, small hotelier, road side hawkers etc as they will not be paying a cost of cylinder towards the on money of Rs. 150/- to Rs. 200/- as now they have to pay only Rs. 100/- extra in the suggested proposal.

This constitute 45% of the LPG consumption and cover a major portion of the population which is therefore benefited by Rs. 50/- to Rs. 100/- per cylinder by way of reduction of the cylinder against the price presently being paid to the distributor by the dhabawalas. Politically it may be sound to convey that effectively price of LPG is getting reduced basically for the poor people who use these bhabas etc. for their food.

2. The price for the middle class population and above will definitely get increased by Rs. 100/-. However this middle class will effectively not be paying Rs. 100/- but lower than Rs. 100/- as described in subsequent Para.

In addition the impact of increase can be lowered by approaching the State Govt. to reduce the Sales Tax on LPG maybe reduced to the bare minimum. All political parties need to be requested that they should ask respective Govt. in the States to reduce the sales Tax rates on LPG.

3. Diversion of the LPG will totally get stopped and in turn the theft taking place from the LPG cylinders in transit to the market will stop. Domestic customer will get cylinders with proper weight.

Presently in some cases two to there KG. gas is being siphoned out of the existing cylinders. Depriving the genuine LPG consumers the full quantity paid for. Once the uniform price is introduced, there will be no temptation to siphon out the LPG and therefore the genuine consumers benefit by 15-20%. This the effective increase of price not the middle class consumers is Rs. 55/- Rs. 60/- as consumer is presently losing 15-20% gas in the form of under weight cylinder basically on account of the temptation to steal the form the cylinder to sale in black money on account of the differential pricing.

4. Generation of black money to the extent of Rs. 4000 crores will stop with its evil effects including creating inflationary pressure in the market which again in term help the poor people.

5. The subsidy in the first phase will come down to be extend of Rs. 5500 to Rs. 6000 crore There will be indirect reduction in subsidy on account of increased quality of cylinder having an impact on the consumption of gas leading to reduction in consumption.

6. Reduction in subsidy will reduce the pressure on the central government budget, which in turn can afford to pass on the benefit even to the middle class and above population by way of reduction in taxes.

In fact politically it need to be sold to the concerned political parties that through the implementation of the uniform pricing system to be implemented by rationalizing the pricing (increasing price by Rs. 100/- in first phase) about half of the population (poor people) is benefited where there will be saving Rs. 50/- to Rs. 100/- per cylinder being presently paid through the on money. And other half of the population, which relatively can afford has to pay Rs. 100/- per cylinder (effectively increase is Rs. 55-60/-) and therefore helping the other segment of the population i.e. poor people.