[Stoves] About LPG and India. Re: [stove] Ujjwala explained

Nikhil Desai pienergy2008 at gmail.com
Wed Oct 4 00:26:40 CDT 2017


Ron:

There is something wrong with this table. I have numbers for Delhi from the
Ministry of Petroleum and Natural Gas I can share once I have finished
compiling the time series.

My comments on Kirk Smith's paean to Modi indicated that a) the GoI has
announced that it will reduce LPG subsidy so as to eliminate it by March
2018 BUT b) it could continue manipulating the prices of "subsidized"
(DBTL, even when DBTL is zero) as well as unsubsidized LPG so as to
minimize public sector oil company's losses, noted under "unrecovered
losses".

If that is confusing, welcome to Government of India. Cooking the books is
our favorite pastime, especially when it comes to electricity, oil and gas,
coals, irrigation, food procurement and subsidies.

Here, the numbers should be that the price of subsidized cylinder rose from
Rs. 502.50 to Rs. 576, while the subsidy rose from Rs 60 to Rs 90.5 (from
August to September). The net cost to consumer - should he have used the
cash transfer toward gas cylinder purchase - thus rose from Rs. 442.50 to
Rs. 485.50.

The MOPNG uses a formula for setting the price for "subsidized" LPG. This
formula takes into account the changes in reference "benchmark" - some
"world price", I forget - and then computes all sorts of taxes and charges
to come up with a number. Then the government decides - in no formulaic
manner - how much subsidy to transfer in the customers' bank accounts. (In
this case some USc 7/kg in August and USc 12/kg in September).

Re: "My main question is this:  if a poor family sells its cylinder (for
485.50 Rs - or more/less?), how are future “balance credits to their bank
account” handled as that container is refilled?  Does the purchaser of the
container only gain the 90.5 Rs benefit one time?  Can the poor buy low and
sell high any number of times?"

First, the subsidized customer would probably sell at a price that comes
close to the unsubsidized price (also fixed), less some hassle cost. His
future cash transfers (vary with government whims) are not affected. What
the purchaser gets is just the cylinder, at a price say of Rs. 700 (I am
making up the price for unsubsidized LPG).

You may ask - why isn't "unsubsidized" LPG just the gross price of the
"subsidized" LPG, just that the "subsidized" customer gets to pocket the
"direct benefit" (subsidy payment to his bank account)?

Well, then you are asking a reasonable question. Markets don't function
rationally, nor does the Government of India.

Trust me, my friend, I have spent more than 30 years trying to figure out
Indian oil and gas finances. No luck yet. Systems keep changing. There was
an Oil Coordination Committee and a pool of surplus that was depleted as
needed. When world oil prices really went up and local prices were not
raised, oil companies could not be made whole, so the government floated
oil bonds.

++++++++++++

Re: your "If you could also supply recent numbers for the cost of charcoal,
 I think we can help Paul out for his upcoming trip to Delhi.  It would
appear that LPG might be a better buy than charcoal - on a per MJ basis?
This last assuming char should be at least 3 to 4 times more costly than
wood per kg."

Dr Karve is in Pune, but may have some Mumbai numbers. From what I remember
five years ago, Pune charcoal price (bulk, 20-25 kg sacks) were about Rs.
35-40/kg or at then-current exchange rate, 70-80 USc/kg. Wood sticks were
about 12-15 USc/kg. The woods for charcoal and for direst household burning
seem to come from two very different sources.

What surprised me was that the charcoal prices were pretty uniform in
several cities - higher in winter and for small users. There are some
quality and size variations too.

And that these prices have not changed much in the western and northern
cities I wandered - Rs. 35-45 or at today's exchange rate (Rs 64/$), some
USc 52

Also surprising was that my state (Gujarat) was a major supplier of
charcoal, grown from a certain kind of acacia in a pretty arid area next to
a desert. Some mining or road/building construction operations produced
waste trees that were used for charcoal.

I did not see charcoal in rural areas, at least not for retail sales. Some
industries did use charcoal, but in much larger volumes.

Dr Karve and others would correct me as needed, I am sure.

Nikhil


On Tue, Oct 3, 2017 at 12:50 PM, Ronal W. Larson <rongretlarson at comcast.net>
wrote:

> A.D.
>
> I know you have this one, but others might find this site informative:
> http://www.petroldieselprice.com/lp69/lpg-gas-cylinder-price-in-
> Mumbai-Gr-Bombay
> The pertinent lines show for Mumbai:
>
>
>
> The number that pops out is the big reduction in the subsidy in the past
> two months (bottom line).  How has this gone over?  The poor are now paying
> 485/14.2 = 34.5 Rs/kg, vs formerly  60/14.2 = 4.22 Rs/kg.
>
> I see Mumbai’s August price was the only one that was so low - so perhaps
> the jump there was just delayed and all of India has had this huge change
> recently?
>
> My main question is this:  if a poor family sells its cylinder (for 485.50
> Rs - or more/less?), how are future “balance credits to their bank account”
> handled as that container is refilled?  Does the purchaser of the container
> only gain the 90.5 Rs benefit one time?  Can the poor buy low and sell high
> any number of times?
>
> But I also can’t find a way to justify your 90 Rs/kg ($1.40) cost per kg
> (see my 34.5 Rs/kg above - with the unsubsidized numbers less than 20%
> higher).  These numbers today from the internet are less than half as high.
>
> If you could also supply recent numbers for the cost of charcoal,  I think
> we can help Paul out for his upcoming trip to Delhi.  It would appear that
> LPG might be a better buy than charcoal - on a per MJ basis?  This last
> assuming char should be at least 3 to 4 times more costly than wood per kg.
>
> Ron
>
>
>
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