ANALYSIS OF LPG SCENARIO IN INDIA

Modern LPG was first launched by Union Carbide as “PYROFAX” brand in the year 1920. LPG marketing
started in India in fifties by Burmah Shell & Stanvac in towns around the Refineries. The marketing of
LPG was entrusted to private concessionaires of Esso & Caltex such as erstwhile Kosan Gas, DGPL & JK
Gas.

LPG is either imported from outside or in produced as a by – product in the refineries and petrochemical
plants. Imported LPG arrives at the country’s ports by help of LPG tanker ships. LPG from ports and
refineries is brought to the large storage facilities with the use of pipelines. Here the LPG is stored under
highly refrigerated and pressurized condition. LPG is directly distributed to bulk industrial purchasers via
dedicated large bulk road tankers. For the domestic customers, LPG is distributed in packed form.

LPG till September, 1993 was being marketed in the country by the Public Sector Oil Marketing
Companies (OMCs) only. Since LPG was under short supply, OMCs were importing the product to meet
the requirements. However, inadequate import infrastructure coupled with limited allocation of Foreign
Exchange at official rates made it difficult for OMCs to import LPG and meet the full demand. In order to
overcome this difficult, Government in 1993 introducing the concept of Parallel Marketing Scheme
(PMS). Under PMS, parallel markets (private companies) were allowed to import and market LPG in the
country to packed and bulk consumers in both domestic and non – domestic (commercial and industrial)
sectors. Since then, parallel marketers have been importing and marketing LPG under PMS.

Since domestic LPG marketed by OMCs is subsidized, parallel marketers could not make significant
impact in this sector, however, they are able to compete with OMCs in non – domestic segments.

The LPG market is segmented according to the purpose of the use of LPG as a fuel, i.e. for domestic (90%
of business), commercial and industrial use (rest 10%).

LPG Infrastructure:
LPG is sourced indigenously from Refineries and fractionators and nearly 40% is imported at various
terminals as per list with indicative volume for the year 2014-15 in TMT.

LPG is sourced from 21 refineries across the country. The indigenous production is 10 TMT.

LPG is also sourced from 11 fractionators of GAIL & ONGC. The total production is from such sources is 2
TMT.

The Port which take import of LPG are Dahej, Ennore, Haldia, Jamnagar, JNPT, Mangalore (Incl TOIPL),
Pipavav, Port Blair, Tuticorin & Visakh.

LPG Plants:
There are over 200 bottling plants operational across the country and managed by PSUs, private
bottlers. The total bottling capacity is 4 Million cylinders per day.

Distribution:
Packed LPG is distributed through 17900 distributors of OMCs. The current market share of IOC: HPC:
BPC is 48.7:26.7:25.6. The distributors are appointed through public notice published in newspapers
followed by a public draw. Distributor has to arrange infrastructure like showroom, godown, transport
vehicle etc. to run the business. Cylinders of 14.2 KG are supplied from plant in trucks to godown of
distributors. At present consumers are billed for Non – subsidized LPG price and the subsidy up to 12
cylinders in directly passed on to the bank account. The PaHal or Direct Benefit Transfer of LPG (DBTL)
launched from June 01, 2013 in 291 districts, wherein the cash differential between market and
subsidized price was transferred directly into the account of Aadhaar Card holders. The scheme was
modified and re – launched on 15-11-2014 in 54 Districts and pan India from 01-01-2015. At present
92% of consumers are covered under this scheme.

Various IT initiatives are being taken towards prompt and improved customer service like online
registration for new connection, e-SV preparation, online payment for new connection and refill.

Government is also making inroads in the rural and far flung areas through their scheme Pradhan Mantri
Ujjawla Yojna (PMUY). Government is targeting to release 5 Cr LPG connections to BPL families in the
next three years under this scheme. A budgetary allocation of Rs. 8000 Cr over a period of next three
years will be made for this purpose. All the Districts where LPG penetration is less than the National LPG
penetration average of 62% are being given high priority for releasing connections.

It is expected that in the next few years more than 10 Cr Connections will be released, at least 50% of
them in rural areas and to Below Poverty Line families. The network of LPG Distributorships is also being
improved by commissioning almost 10000 new Distributors to cater to the target.