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Social Auditing & Transparency: Gas Cylinder Distribution in India

March 25, 2016

*Abhishek Narain Singh (Institute of Management Technology Nagpur) *and P. Vigneswara Ilavarasan (\Indian Institute of Technology Delhi)

Abstract

The present case describes how an online portal with real time update about distribution of domestic liquid petroleum gas (LPG) cylinders has enabled social auditing which in turn resulted in increased transparency, and reduced wastage and corruption in India.

In India, approximately, 3 million Liquid Petroleum Gas (LPG) cylinders are delivered everyday to 153.2 million households for daily cooking purposes (interview with Dr. Neeraj Mittal, Joint Secretary — Marketing, Ministry of Petroleum and Natural gas). The 14.2 kilo cylinders that cost approximately $16.6 USD (1 USD = 60 INR) are supplied by the three Oil Marketing Companies (OMCs) — Indian Oil Corporation (IOCL), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) — through their 12720 distributors network to half of the Indian population. The distributors are private players who are licensed by the government and receive commission per cylinder sold. The consumers pay only half of the cost due to subsidies and receive twelve cylinders a year. The total subsidy burden of the domestic LPG cylinders was $6.6 billion USD, which is around 25 percent of the overall fuel subsidy burden for India in the year 2012–13. The LPG distribution network was rampant with malpractices — underweight cylinders, ghost connections, diversion to illegal commercial usage and abuse of political power.

In June 2012, the Ministry of Petroleum and Natural Gas launched a portal to make the LPG supply chain distribution system transparent (see Figure 1). In the portal, the following information is offered to the consumers: LPG usage patterns, booking statuses, refill history and consumer information related to their number/name/distributors’ names. Consumers can also make a connection surrender request, view subsidies availed, read rating of their distributors with respect to cylinder delivery time, communicate with distributors and OMCs, and rate distributors on five perceived parameters. The OMCs and distributors can observe the consumption pattern of their consumers and compare their performance with others.

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The number of visitors in OMCs websites were around 5,000 per day prior to June, 2012. After the transparency portal, the number of visitors in the OMC’s websites increased rampantly to around 18.4 million as of June, 2013, averaging to 47,000 hits per day for seeking various services on the portal. The bulk of the increased site visits can only be accounted for by the newly available transparency portal and connected services.

The portal offered real time information on the basis of a beneficiary database, which was validated by Know Your Customer documents. During the later part of 2013, the database linked to bank accounts, which were authenticated by unique identity numbers used by the government. The consumers paid full price for the cylinders and received a subsidy in their bank accounts directly. This greatly reduced duplicate accounts and enabled citizens to track any political elite. The portal enabled citizens to audit subsidies disbursed, detect high consumption LPG consumers, and monitor suspect multiple connections. It also helped consumers track cylinder booking and monitor distributor performance through a rating system.

In the portal, the delivery efficiency of each distributor was published through a star-rating program (please see Figure 2 for a sample). Poor service delivery by a distributor would result in license cancellation. Consumers were also allowed to surrender connections online consumption was tracked by the OMCs. Initially, there was resistance from distributors partly due to the vested interests.

Figure 2

Due to the uncoupling of consumers and social auditing through the transparency portal, there was a significant drop in the growth of domestic LPG from 7.5% in 2011–2012 to 2.4% in 2012–2013. A total of 6.7 million connections have been blocked so far, leading recurring savings in subsidies of $267 million USD per annum (at a rate of $6 USD of a subsidy per cylinder and an average consumption of 5.3 cylinders per connection).

> > Initiatives such as online surrenders as well as rating distributors on perceived service levels and portability, have helped consumers raise their voices and exercise their choice.

For example, earlier consumers found it difficult to surrender connections due to distributors’ resistance tactics. The portal witnessed 3,975 surrender requests as of June 2013. Also, online inter-distributor portability resulted in healthy competition and better service delivery. The number of distributors who were rated increased from 3,949 to 7,421 during June, 2012 to June, 2013. The distribution rating improved the overall service delivery as well and the proportion of 5 and 4 star distributors increased from 43% to 68%, between December, 2012 and June, 2013.

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The portal reduced diversion of LPG commercial sales, thereby reducing the carbon footprint. The portal enabled many processes such as surrendering connections, filing complaints, and communicating to consumers in case of duplicate connections- thus saving paperwork and other unsustainable resources. In the 48th Annual Convention of Computer Society of India (CSI), the portal was awarded the prestigious CSI Nihilent National e-Governance Award for 2012–13.

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