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Aadhaar

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1. Introduction

LPG for household consumption is nearly 89% of total LPG off-take in India. Total LPG consumption in the country for the year 2011-12 is projected to be more than 16.5 MMT (Million Metric Tons) and is expected to grow at 8-9% as envisaged in Vision 2015 document of Ministry of Petroleum and Natural Gas. OMCs are holding a customer base of more than 133 million households currently. More than 11000 LPG distributors home deliver nearly 3 million domestic LPG cylinders every day to cater to this mammoth customer base constituting more than half of country's population.

LPG for Domestic Cooking is heavily subsidised. In order to restrict the use of subsidised LPG only for genuine domestic customers, every household is permitted for only one registered LPG connection in the name of one of the family members. However every registered customer is entitled to receive refills as per their domestic cooking need.

2. Challenges in LPG Distribution & Leveraging Aadhaar

LPG is an exceptional fuel. It is considered as a green fuel and has wide range of applications. The environment friendliness and usability for multiple applications coined with the arbitrage available in its pricing entice the market players to divert the product meant for domestic cooking for other applications.

All LPG distribution operations are recorded using robust software provided by OMCs to distributors. The information thus generated is captured and made into meaningful reports providing business insights to OMCs. Hence, the market players use ways and means outside the software realm to manipulate and take advantage of arbitrage available in inherent vulnerability of Subsidised Domestic LPG Marketing.

2.1 Use of Fake Identities to draw subsidies.

Over the years, such trends of diversion have been facilitated by obtaining more than one LPG connection per household violating LPG Control Order. This is achieved through duplicate and/or fake connections. Multiple connections in the name of existing customers and/or fake connections in the name and address of non-existent customers provide enough opportunity to draw subsidised cylinders and use them for purposes other than domestic cooking.

Aadhaar is providing a unique identity to every resident of the country. Integrating the Aadhaar number of the resident by one time validation to identify the beneficiaries of subsidized LPG across the OMCs will help to clean their digitised data base, by de-duplicating the Aadhaar numbers. Weeding out duplicate and fake beneficiaries in the system will serve as a deterrent to misuse of subsidized LPG.

2.2 Lack of strong process to verify receipt by genuine beneficiary.

LPG cylinders are home delivered. At the time of delivery, the household identity is manually verified and the receipt acknowledged by the resident / family member. Hence, the current process of LPG distribution to customers has a weak form of verification and consent from a residential consumer at the time of acceptance of delivery. Being a manual process, the system does not have a fool proof re-verification mechanism. This leaves an opportunity for diversion of the cylinder by stakeholders in the supply chain to non-genuine customers for non-domestic applications without the knowledge of registered customers.

The online authentication service provided by Aadhaar can be incorporated in the subsidized residential LPG process to verify the genuine beneficiary at the time of delivery. This strong verification of the resident is a deterrent to divert the cylinders by the business partners and supply the same to non-genuineness without the consent of customers.

2.3 Lack of Portability of Identity & Quality of Service

The access to subsidized LPG requires sufficient proof for local address and identity, with an increasing migratory population, this becomes a bottle neck. In addition, in the current system an LPG customer has his/her connection mapped to a specific OMC distributor in his/her locality, binding them to the distributor. In the event of below par service by the distributor, the customer does not have the freedom to move to distributor offering better service.

Aadhaar provides the resident an identity which can be verified across the nation. By incorporating Aadhaar in the customer KYC and using Aadhaar authentication for delivery with the centralized product movement monitoring software already in place with OMCs, there is an opportunity available for smooth portability of LPG connections across distributor's intra or inter OMC. (Recharging a mobile connection from any physical touch point across the country can be considered as an analogy). Such a facility would encourage competition between distributors and hence pave way for better customer service.

2.4 Availability of Infrastructure to facilitate direct transfer of Subsidy

Currently domestic LPG is supplied at the subsidised price and subsidy component is designed to be paid by the government directly to OMCs. It would be desirable for the government to distribute LPG in the entire supply chain at market price, removing the incentive for its diversion.

The integration of Aadhaar Number of the beneficiary and performing Aadhaar Authentication at the time of service delivery will enable the government to consider leveraging the Aadhaar Enabled Bank Account of the beneficiary where the subsidy amount may get directly credited for a verified residential delivery. In such a scenario LPG can be supplied at market price.

3. Integration of Aadhaar in LPG Distribution - Process Re-engineering

3.1 Current Process

1. OMC Distributor registers a prospective customer in a distributor application.(Prospective customer obtains a connection post fulfilment of official requirements for release of connection for domestic LPG applicable to the OMCs.)
2. Customer places a refill request to the distributor through various channels (Depending on the channel offered by the distributor i.e. manual, telephone, IVRS, SMS and web).
3. The refill request is updated automatically or the distributor enters the same in the application.

4. Distributor generates a cash memo against the bookings.
5. Delivery boy carries the printed copy of cash memo.
6. Delivery boy delivers filled cylinder to customer premises.
7. Delivery boy receives empty cylinder and payment at subsidised price against the delivery and submits acknowledged cash memo and empty cylinder back to the distributor.
8. Delivered cash memo details are entered into distributor application.
9. OMC central server is updated.

3.2 Aadhaar Integrated Process

1. At the time of enrolment Aadhaar number is validated through biometric and demographic authentication.
2. Customer places a refill request to the distributor through various channels.
3. The refill request is updated automatically or the distributor enters the same in the application.
4. Distributor loads the details of the day's delivery into a PoS device.
5. The delivery boy carries the PoS device and filled cylinders to customer premises.
6. Aadhaar Authentication request of customer sent to CIDR (UIDAI system).
7. Online verification response from CIDR to PoS device, followed by receipt of empty cylinder, printing of cash memo and collects payment at market price against delivery.
8. The information from handheld device is uploaded into OMCs central system real time.
9. Central server sends a batch file at predefined frequency with Aadhaar Numbers of Customer (beneficiary) and subsidy amount to be paid to Sponsor Bank.
10. Sponsor Bank initiates cash transfer through NPCI Gateway to the bank account of the Customers.

Conclusion

Aadhaar in LPG marketing is expected to improve portability, increase competition, enhance customer satisfaction, streamline subsidy disbursement and reduce subsidy outgo.

   
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