Subsidy & Domestic LPG

During the period of 1995 to 2005, domestic cooking gas (LPG) coverage in the India increased manifold in both rural and urban areas.   It was necessary public commodity, hence Government of India hugely subsidize it and puts the rights on production, distribution, licensing and price control with her.  The distribution of LPG was controlled by Public Sector Units, mostly by Indian Oil and Bharat Petroleum.  License for distribution was compulsory and selling price was controlled by Government of India. Each household was allowed only double bottle connection.  India was importing and producing sufficient quantity of LPG but long waiting lines and street-fights were common at each LPG outlets.  Why? The reasons were (i) cheap price, (ii) multiple connections and (iii) pilferage.  The domestic LPG was siphoned off for commercial purposes and sometime it was used as vehicle fuel.

Government emphasis on the three points, (i) linking of LPG connection with AADHAR to eliminated multiple connections, (ii) charges price at market level with return subsidy and (iii) and limiting subsidized bottles in one financial year.  All three steps were against the populism governance, but these three steps eliminate long queues and now, there are excess bottle supplies at LPG outlets. 

It shows that, market price always help to supply side of the public goods.  It removes pilferage, misuse and shortage of the public goods.