Black market: the plague of the LPG market

Black market: the plague of the LPG market

The black market represents a severe plague for domestic cooking gas cylinders, especially in underdeveloped countries where these marketers seem to have devised new ways to carry out their activities, despite the introduction of the modified direct benefit transfer scheme for LPG.

Over the years, countries such as India and Egypt have suffered the illegal sale of LPG cylinders, that particularly in some villages, has become a thriving business, by taking advantage of the absence of a stringent regulatory authority to curb it.

How it works

As The Times of India has reported, some reliable sources have revealed that without gas agencies being involved, it wouldn’t be possible to run this lucrative business. Cylinders are issued from the agencies in the names of such customers to be resold on the black market.

This activity seems to continue mostly at the request of unscrupulous customers and delivery men.

Regarding this point, The Times of India has explained, by imaging a typical scenario, how a customer purchases a domestic LPG cylinder from the yearly quota of 12 subsidised cylinders, which is then resold to commercial users or elsewhere at a higher price.

In the same article, an interviewee who has chosen to remain anonymous, revealed he has been approached by his delivery man with an offer: the man suggested the customer book an extra cylinder from his quota of 12 and instead of buying it, give it to the delivery man. The customer will get the subsidy amount due to him for “buying” the cylinder, and the delivery man will be able to sell it elsewhere for a higher price.

However, whilst similar circumstances would compromise the position of the gas distributors, they are defending their role on the market, by saying they can’t stop them unless oil marketing companies empower distributors to check the actual LPG consumption of customers and work out a procedure where they will have to apply for any cylinder they need over and above this consumption.

Another senior official from an oil marketing company whose name has not been revealed, said “Such customers cannot be held responsible unless authorities raid the commercial establishments to which the cylinders are being supplied. Something could be done only when evidence of such practices arises.”

Instead, the gas cylinder crisis in Egypt, between February and March 2015, has increased the danger of the black market, leading to the arrest of two gas station owners in Samallout. Elsewhere, the driver of a seized vehicle was arrested and he confessed to having obtained the cylinders from the government’s warehouses, to be sold at black market prices.

In Nepal the situation appears similar. Despite having taken several steps by the state-owned Nepal Oil Corporation (NOC) to boost the supply of LPG, consumers are still not able to obtain cooking gas easily, and the price has skyrocketed on the black market. Lawmakers have accused the government of turning a deaf ear to the black market sale of cooking gas, saying “it’s to blame for the current shortage, not the the Indian Oil Corporation”, causing the provocative reply to the black market accusation by the cartoonist Rabindra Manandhar on Twitter.

Advice

Black markets may emerge due to a shortage or limitation of products and due to the convenience of merchandise availability for cheap sale or resale. Furthermore, they are encouraged by buyers who have no regard for legality of the supply and of the sale, and people who have no conscience regarding law.

Whilst the black market seems impossible to eradicate as it doesn’t happen in one place or location, but it’s an illegal exchange, on the other hand people have the power to challenge this idea, by starting to follow the legal way.

For this reason, it’s essential to purchase gas cylinders only from authorised distributors, and asking for a receipt, making sure of receiving them upon payment.

Conclusion

In the light of what has been reported, we wish for the local governments to support the initiatives started by the main associations representing the leading voice in the LPG industry (WLPGA, UKLPG and AEGPL).

On the other hand, Aburi Composites are offering an effective alternative to reduce these theft activities.

Indeed, apart from their unique qualities, our composite LPG cylinders can be manufactured with  RFID (radio frequency identification) to allow you to track your cylinders.

With RFID technology, you will be aware of where and how your LPG cylinders are being managed. Indeed, RFID ensures the cylinder availability is in the right place with no discrepancies and zero errors. It makes the supply chain considerably more precise and improves the efficiency and reliability of the entire chain. As real time information is made available, administration and planning processes can be significantly improved.