The ministry is busy working out the procedures for streamlining delivery of SKO for PDS in consultations with the state civil supplies department on basis of the study report conducted by Tata Economic Consultancy Services (TECS) on behalf of Indian Oil Corporation Ltd (IOCL).

This diversion of SKO through black marketing has not only created artificial scarcity for the commodity in the PDS, but has been responsible for adulteration of high speed diesel (HSD) and motor spirit (MS) at petrol pumps. This adulteration of HSD and MS with SKO causes increased consumption of petroleum products leading to increased release of pollutants and consequent severe damage to the engine.

There are about 6384 retail dealers in SKO/LDO in the country. The study conducted by TECSnoted that Maharashtra, Gujarat and MP get 285,000 kilo litre of SKO per month for distribution under PDS, out of which about 25 per cent of SKO are diverted. Andhra Pradesh, Tamil Nadu and Karnataka get 177,000 kilo litre of SKO per month, out of which 20 per cent are diverted to open market.

Similarly, UP, Punjab and Delhi get 160,000 kilo litre of SKO per month for PDS, out of which 27 per cent are diverted. West Bengal, Bihar get 130 kilo litre of SKO per month for PDS, out of which 30 per cent are diverted. The total supply of SKO for PDS in the country is about 10.8 million kl per month.

Analysing the cause of diversion of SKO, the TECS study pointed out that the widening price differentials between the SKO subsidised for PDS and HSD and MS is the major contributory factor for diversion of SKO. SKO for PDS is priced at Rs 2.67 per litre, SKO is sold at about Rs 7.90 per litre in open market, whilst the price of MS is about Rs 27.97 per litre. The study, therefore, called for an appropriate increasein the prices of SKO earmarked for PDS.

The study noted that in many countries like Myanmar and Thailand the prices of SKO are higher than HSD and in countries like neighbouring Bangladesh, Malaysia and Vietnam the prices of SKO and HSD are almost the same.

In Sri Lanka, also, the price differential between SKO and HSD is very narrow.

Arguing the need for appropriate increase in price of SKO, the study stated a comparison of trends in prices of major PDS commodities till 1993 revealed that while the compound annual rate of growth over the past decade in SKO prices has been at only 3.5 per cent.

In case of rice it has been 8.7 per cent, in case of wheat it has been 7.8 per cent and in case of levy sugar it has been 6.5 per cent.

The TECS study stated consumers are paying much higher prices for PDS SKO purchased by them in excess of their quota. This indicated that the consumers can afford to purchase SKO at enhanced rate. In the same breath, the study made a dig at the functioning of PDS in thecountry. It stated that the objective of serving the poor and needy through PDS has not been fully met as the network is yet to penetrate remote corners of the country where the need for subsidised SKO is largely felt.

The quota of a state or a district is determined by the supplies in the past as the government has categorised SKO as a zero growth product. The study, in this context, called for reviewing the allocation quota after assessing actual requirements of the need-based vulnerable sections of the society. It also called for phasing out the beneficiaries having LPG connections.

Pointing out the inconsistencies in quota allocation, the study noted that Maharashtra despite being smaller than Madhya Pradesh and UP in area and having lower population than Bihar and UP still gets 17.9 per cent of the total allocation for the country. UP alone gets 11.19 per cent of the total allocation. Gujarat 9.3 per cent, West Bengal 8.8 per cent and Tamil Nadu 7.7 per cent.

In the existing structure OilCoordination Committee decides the allocation for each state whilst the oil companies decide their dealer-wise allocation. Retail-wise allocations from wholesalers are decided by the state food and civil supplies departments.

At present there are monthly variations in quota allocations to wholesalers. The number of retailers to whom they supply keep changing every month. The study, in this context, suggested that allocations per dealer should be fixed for at least for three months. The retailers to whom the wholesaler has to deliver supplies should also remain unchanged over the same period.

The policy of dealer appointment has to be reviewed as many dealers have monthly quota less than the required 250 kl and number of dealers appointment continued to rise. Besides, the practice of appointing sub-wholesalers should be done away with as this increases the scope for diversion.

Another cause for diversion of SKO is due to the low rate of commission being paid to retailers and hawkers. Also the sale quotaof SKO to commercial and industrial sector is quite inadequate. These sectors have the capacity to pay high prices and often purchase SKO from the parallel black market. These industrial and commercial consumers are textile mills, paint manufacturers and application shops, workshops and garages, hotels restaurants and dhabas.

The study suggested strict and vigilant monitoring of delivery, stock and disposal of SKO by the concerned oil companies and the state food and civil supplies departments. Oil companies like OC, HPC, BPC and IBP who are in charge of the oil depots should inspect the movements and stocks of SKO at the levels of wholesale dealers an sub dealers, transporters and petrol pumps. The state civil supplies departments should also carry out regular inspections of stocks at the levels of wholesale dealers and sub dealers, transporter, petrol pumps, fair price shops, hawkers and beneficiaries.

The study stated that the proposed delivered supply of SKO which is likely to be introduced bythe government for overcoming the problem of inversion may not yield the desired result due to the problems of availability of space, investment and expectation of returns by the dealers. Besides there are risks and hazards associated with the multiple handling storage and unloading of the inflammable SKO.