Tuesday, 7 May 2013

Thou shall be subsidised whether you want it or not

The law is an ass. Governments are a bigger ass. Ramamritham is the chief ass. But even by those standards this takes the cake.

Those familiar with India knows that this poor country indulges in wasteful expenditure of the worst sort. Free colour TVs, grinders, etc have made the news. But the criminal, inexcusable and worst sort of government waste is the subsidy on Liquefied Petroleum Gas (LPG). If there was a word stronger than criminal, I would use it.

LPG  is supplied to all and sundry at a subsidy. It is sold at roughly half the cost - the government is supposed to pay the balance half to the oil companies , but it does so as and when it feels like it, or not at all. It is actually quite difficult to estimate how much the total subsidy is as the government hides this in different pockets but my estimate is that this monstrosity costs us some Rs 30,000 crores.

The really poor don't use any cooking fuel at all - maybe firewood. The poor use kerosene. Only the relatively rich use LPG. Its actually the middle class which is pocketing all this money.

The middle class moans about the cost of cooking gas . And yet you only have to go 1 mile near T Nagar and the gold shops in Chennai to see the amount of money the middle class has. The total "subsidy" for a  year that you can now get is Rs 3600 or so per family. Are you telling me that the middle class household cannot afford to pay Rs 3600 more per year for cooking their food. This is the same middle class which is snapping up the newest model of smartphones every year.  Its a complete farce.

The impact overall of this organised stealing is simply awful. India has made no investments at all in piped gas supply. LPG cylinders are  still being trucked all over the country. There is zero interest in any alternate fuels.  A whole bureaucracy has evolved around oil companies, agencies, transporters etc. Try getting a new cooking gas connection now - its possibly easier to learn quantum mechanics.  If you wish to do a case study on how not to treat a consumer, all you have to do is stand near a gas agency for an hour and witness the tales of woe of the people coming there.

Actually, raising the price of cooking gas cylinder by Rs 1000 per cylinder might be a good idea - it will cause Rajalakshmi to reduce her girth ! Eating less food, especially by the middle class, is a desirable social goal :)

The problem is that there is really no other choice. Private gas companies do offer unsubsidised cooking gas without all the contortions, but they are small scale and unreliable. Even then, quite a few consumers have opted to go there, simply because of the impossibility of handling Ramamritham's requirements.

Being a contentious citizen (!!!), this blogger went to his agency and asked not to be given a subsidy. He was willing to pay the full price. He was promptly told that this was not possible and he has no option but to take the subsidised price.

What sort of a place is this where a consumer offers to pay more and the seller refuses. If ever proof was needed that governments, and Ramamrithams, are an ass ..........


  1. The Indian Middle Class (or for that matter the middle class any where in the world, including you and I) are usually content to leave things at status quo. In fact the biggest opposition to any form of change, revolutionary or otherwise, comes from the middle class. Leave us alone to instant gratification with gravity defying bollywood heros and skin show heroines, pyjama cricket, the 'festive spirit' and literally bringing god to the roads, occassional nationalistic frevor stirred by a septuagenarian fighting lost causes and the candlelight vigils stirred by an immediate 'crisis'(it could be a crime, or real/imaginary brotherhood/enimity with neighbors across the west/north/south borders). LPG subsidy and Ramamrithams do not enter our realm of collective consciousness and cocoon of security.

  2. The poor will get a Free TV but spends 200 bugs for a cable connection and that is 2400 per year. All these schemes are designed in such a way that someone looks at the commercial interest. On the subsidy of LPG, I don't mind paying it is not such a big payout from your pocket for a family of 4 where the usage of LPG is not beyond 6-8 per year. The problem today is that people are used to subsidy or free (or if I have to say so - free-ya koodutha phenol kooda koodipooum) and it will hurt them when it is stopped. When I was in Calcutta Branch of HUL, I have come across how the fertilizer subsidy is pocketed by the fertilizer manufacturers and it doesn't really reach the people intended so...

  3. @Kiwi - That's rather harsh ! Human nature being what it is, everybody loves a freebie. My fury is not so much at the people using the subsidy - its is misguided policy that wastes money like this. Its not even a vote winner ; seriously is somebody going to lose elections because he withdrew cooking gas subsidy ???

    @Swamy - Yeah; the whole freebie culture has got out of hand. Don't even start on fertiliser subsidy - its three times the cooking gas subsidy and is another of those doles that are cornered by the rich. This time its not the manufacturers who pocket it - its the rural rich.

  4. yep, as Charles Dickens put it so well in Oliver Twist, "“the law is a ass—a idiot" ...
    As is often joked about in public policy, a subsidy is bad only if I don't get that ;) The group that benefits from the gas subsidy won't raise a stink (ahem, pun intended!) about it but will passionately point out various other subsidies that others receive ...
    As has been documented really, really, well in the economic development literature, India's urban folk--the urban poor included--get way, way more subsidies when the ones who really, really, need assistance are the rural poor ... your post on gas subsidy will be an additional evidence to the "urban bias" ...
    The only part here is that you are unfairly including Ramamirtham in this narrative ;) the subsidy is not a Ramamirtham creation ... poor guy--he has been beaten up quite a bit ....

  5. @sriram - Sympathy for Ramamritham ?? My God !!! Yes, he is not the author of this monstrosity, but look at how he has taken advantage of it. Try getting a new gas connection or even transferring the connection. And this is the process for getting a refill. You have to get a call centre. They will take a booking but nobody will tell you when it will be delivered. So, for the next 1-2-7-10-20 days whatever, you take leave from office and stand at your doorstep. The gas guy can come anytime (woe betide you if you go to pee, for that's exactly when he will come). And if you have not opened the door within 300 milli seconds of him ringing the bell, he will do an about turn and take off faster than Michael Schumacher ever started a Grand Prix. Your booking stands cancelled and you start this charade all over again. How do I know ? I just did this last week

    And you designate Ramamritham as "poor" . Grrrrrr !!

  6. i sense a lot of anti-ramamirtham emotions in you. get yourself a pinata and paint a ramamirtham face on it, and then take your trusted old cricket bat and just whack the hell out of ramamirtham, er, the pinata :)
    after that, you will be standing at street corners celebrating the peace and joy within and will be handing out crisp thousand-rupee notes to everybody passing by ... muahahaha ;)

    seriously though, i agree with you about the craziness of the procedures. but, ramamirtham is only a symptom of the problem and not the disease itself. the crazy policies that the central and state governments adopt are what gives rise to the ramamirthams who make life a hell for the regular aam-aadmi. if those policies weren't there, then ramamirtham also is gone.

  7. @sriram - Ha Ha ha. Good idea :)

    Yes, Ramamritham's actions are always the result of bad policies, but does he have to implement them with such zeal vigour and inflict his sadistic instincts on us :)

  8. Until i read this post, i didnt know the subsidy part in the LPG gas cylinders. anyways, these agencies run their systems like mafia gangs. We have faced this issue of cancellation of bookings n number of times, since there would be no one at home between 8.00 am to 6.00 pm. For the last 10 years, we pick up the gas directly from the gas agency - hubby has one more duty added to his list. When we shifted our house a couple of years back we didnt change our agency, for all these hassles you have mentioned. we travel around 15 kms to pick our cylinder.
    No use trying to refuse teh subsidy in a country, where people who do not accept the freebies are looked down upon. and even those who are probably the so called upper middle class, scamper around and do not mind standing in queues to pick up these freebies.

  9. @Vincy - Oh yes - nobody turns away a freebie; that I understand. But really they should abolish this completely. Btw, the option of picking it up has been banned for some 4 years in Karnataka, ostensibly as a measure to stop misuse of cylinders by commercial establishments - so no choice but to wait near the door !!!

  10. the nerd in me (we can duke it out on who is the bigger nerd!!!) comes back here to add more to how the government spends gazillions on taking care of the middle and upper classes, when it is the rural poor and then the urban poor who deserve all that support ...

    From the NY Times:
    "A government panel report last year called diesel subsidies a “major contributor to India’s fiscal deterioration” that jacked up the national deficits and prompted international threats of a ratings downgrade. The report recommended phasing out diesel and cooking gas subsidies, which the government is now attempting at the risk of a middle-class backlash and media outrage.

    The subsidies for the well-off don’t stop there. Many rich Indians still pay small amounts like $400 a year for education in the country’s top colleges – a legacy of deep government subsidies for higher education. In a country where millions still do not have access to basic primary education, the higher education subsidies have led to further widening of the gap between the rich and poor, critics say."

    Such a message has been a staple for years--decades, actually--of both the rational analysts and the emotionally driven left. Yet, the power of the middle and upper classes is ...

    An aside: a few years ago, when visiting India, at a family conversation that employed the usage "we middle class" I attempted to correct their perception that they were middle class, by pointing out that there were hundreds of millions of Indians way, way below them, which will make my family a high income class .... but, life is what we perceive it to be , I suppose.
    India does not have the kind of income distribution in society for us to use "middle class" as we would here in the US, for instance. In fact, the skewed distribution in India is even worse than some of the Latin American countries, which traditionally have been the posters for this ...

  11. @sriram - Yes indeed - there are -plenty of freebies for the rich too. Diesel is a perfect example - what do you say to a guy who buys a Rs20 L car, but opts for the diesel version because it is subsidised, while petrol is not.

    Education is one example, although that is no longer the case. Almost everything in India is subsidised - power, water, transport......


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