Kamal Ghorui
Stopping LPG black market requires commercial supply restoration, market pricing, distributor audits
Officially, there’s no shortage of LPG. Anecdotally, cylinders are selling for twice the official price. That means we have a black market in gas now. This is not surprising when LPG supply to commercial kitchens has been curbed. There’s logic behind govt’s order: until Strait of Hormuz reopens, or enough new suppliers are found, India’s gas stock must meet essential needs first. But as we said yesterday, commercial kitchens are just as “essential” as home kitchens now. They employ lakhs and feed crores daily. If they can’t get gas legally, other means will arise. Gas meant for homes will get diverted – illegally – creating problems all round.
Administrators should know this. As a nation, we grew up on shortages and black markets of all types. In 1970s, parents booked LPG connections for daughters at birth, and Bajaj scooters too. Because delivery took years. Rice, sugar, kerosene, cooking oil, everything was rationed till 1990s, and rations were sold at open market prices. That was common knowledge. Why do we have a 1970s situation in 2026? Supply shock is only half the answer. The bigger reason is disruption of free market. There’s a reduced stock of gas, and a large, desperate commercial sector that can’t get any. Ergo, black market.
A cold-hearted economist would let gas find its right price. But govt can’t be cold-hearted. It can’t ask poor domestic consumers to pay ₹400 or ₹500 more per refill. The market is less squeamish. It sees a gap, and demands a “scarcity premium”. But this is risky work. Gas distributors and their agents face stiff penalties, if caught. So they demand a “risk premium” as well. Effectively, LPG ends up costing more in the black market than it would in the “white market”, if govt let demand and supply determine price.
Irony is, the harder govt cracks down, the higher black market’s risk premium will shoot. But if it doesn’t crack down, it risks normalising the black market itself. So, here’s what it must do. One, increase LPG production and purchase. Two, bite the bullet on gas price. It’s not diesel, and won’t stoke inflation the same way. Three, audit distributors and ask marketing firms to start online dashboards showing real-time stock at the gas agency level. Transparency is the best fix for anything black. Higher prices may be politically unpalatable, but at least the money will flow to PSU companies, who can buy more gas with it. It’s a better outcome than enriching middlemen.
https://assets.cambridge.org/97810092/07669/frontmatter/9781009207669_frontmatter.pdf
https://www.aeaweb.org/articles?id=10.1257/jel.38.1.77
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