The Narendra Modi government’s flagship Pradhan Mantri Ujjwala Yojana (PMUY), which has provided more than 3 crore liquefied petroleum gas (LPG) connections to poor households over the last one and a half years.
The Narendra Modi government’s flagship Pradhan Mantri Ujjwala Yojana (PMUY), which has provided more than 3 crore liquefied petroleum gas (LPG) connections to poor households over the last one and a half years, has had a multiplier effect on the manufacturers of equipment such as cylinders, pressure regulators, stoves and tubing — most of which fall in the micro, small and medium enterprises (MSME) segment. The number of cylinder makers across the country in 2014-15 was 102, which has gone up to 146 in 2016-17 and this industry’s turnover has surged from Rs 3,491 crore to Rs 5,258 crore during the period. Similarly, the number of stove manufacturers has gone up from 39 to 45 and the corresponding increase in turnover has been from Rs 2,253 crore to Rs 2,728 crore.
Overall, the total turnover of companies manufacturing cylinders, pressure regulators, stoves and connecting tubes has increased by 42% between 2014-15 and 2016-17 from Rs 6,240 crore to Rs 8,858 crore. For the six months between April and September, 2017, the combined turnover of these industries stood at Rs 4,281 crore.
The ministry of petroleum and natural gas under minister Dharmendra Pradhan launched PMUY in May 2016 to provide subsidised LPG connections to women belonging to the below-poverty-line category. The government is targeting to provide 5 crore LPG connections by May 2019 under the scheme with the ministry of finance providing a support of Rs 8,000 crore. As reported by FE earlier, the petroleum ministry is in the process of getting Cabinet approval to add another 3 crore beneficiaries at an additional cost of Rs 4,800 crore. According to Anish De, partner at consultancy firm KPMG, growth in the equipment manufacturing segment is likely to continue at least till 2019 as there will be a continued push.
“It (PMUY) has definitely helped manufacturers. However, a saturation point will come once the scheme is over,” said De. The manufacturers of pressure regulators and tubes have also benefited with number of makers going up from 35 to 26 and 12 to 17, respectively, between 2014-15 and 2016-17. The turnovers has correspondingly increased during the period from Rs 250 crore to Rs 497 crore for makers of regulators and from Rs 246 crore to Rs 375 crore for pipe makers. The total number of manufacturers has grown by 34%. Kolkata-based Chandawat Udyog (Cylinders) has seen a surge in demand from oil marketing companies (OMCs). “Earlier tender size used to be 1 crore cylinders per year for each OMC. This has gone up five times now,” said Bhupesh Agarwal, director of the company which produces 30,000 cylinders per year. He added that competition has gone up after the launch of PMUY and there used to only 64 companies manufacturing cylinders in 2005.
Agarwal, however, is cautious about the future as he, like De, sees demand stagnating after two or three years. The average life of an LPG cylinder is 20 years wherein it is typically repaired once after 10 years and then five years from then. The three OMCs — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation — together hold an inventory of 25-30 crore LPG cylinders at any point in time as many of the cylinders undergo repair at bottling plants. The increased usage of LPG has also led OMCs to plan expansion of bottling capacity. As reported by FE earlier, they are expected to have an additional capacity of 1,242 tonnes per annum in their LPG bottling plants by the start of FY22 through six brownfield and 10 greenfield projects. The existing capacity is 23,514 tonnes per annum among 228 bottling plants for the three OMCs.