Reliance, Nayara, Total seek to be part of LPG subsidy transfer mechanism

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Updated: Apr 12, 2019 7:19 AM

Ask the government to allow them to have a level playing field with the state-run oil marketing companies.

According to the Petroleum Planning and Analysis Cell, the three OMCs together have 25.21 crore active LPG customers in the domestic category.

To get a slice of the 20-million-tonne-plus annual sales of packaged domestic liquefied petroleum gas (LPG), parallel marketers, including Reliance Industries (RIL), Nayara Energy and Total, have asked the government to allow them to have a level-playing field with the state-run oil marketing companies (OMCs).

The companies recently met petroleum and natural gas ministry officials and demanded that same as OMCs, they should be allowed to sell subsidised LPG cylinders and be part of the subsidy transfer mechanism. This is expected to expand the market opportunity for these firms. They have also demanded waiver of 5% custom duty paid on LPG import which is not applicable on OMCs.

At present, only OMCs—Indian Oil, BPCL and HPCL—sell subsidised LPG wherein consumers pay the full price upfront, but eligible beneficiaries subsequently get back the subsidy amount in their bank account. Domestic LPG producers have also been given mandate that total output should be supplied to OMCs. Nevertheless, India’s LPG consumption far exceeds its domestic production, and for FY19, the country imported 52% of its LPG requirement.

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Some parallel marketers such as RIL (under brand Reliance Gas) and SuperGas sell LPG cylinders but their business size is small given they are not able to cater those customers who are eligible for subsidy i.e. those households having an annual income of less than Rs 10 lakh.

RIL through a 2015 order has been allowed to sell 10,000 tonne per month of its own LPG but it needs to ensure that it imports the same amount and supply to OMCs at cost-neutral rate. The Mukesh Ambani-owned company has also demanded that it be allowed to sell its entire LPG output in the domestic market.

While RIL did not respond to a query sent by FE, Nayara Energy’s chief executive officer B Anand, in an emailed response, said, “LPG distribution presents an attractive business proposition. If given an opportunity, Nayara Energy would like to participate in marketing of domestic LPG.”

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According to the Petroleum Planning and Analysis Cell, the three OMCs together have 25.21 crore active LPG customers in the domestic category served through a network of 22,654 LPG distributors. The LPG coverage of the country is around 90% and OMCs have 191 LPG bottling plants with rated bottling capacity of around 17.6 million tonne per annum.

While the petroleum ministry is in favour of allowing the waiver, it is unsure about parallel marketers becoming a part of the subsidised LPG market, said a government official.

Allowing private firms to supply subsidised LPG cylinders will build pressure on the government to pay dues on time. However, at present the government manages its finances by not paying the entire due to OMCs. For instance, the government is expected to roll over around Rs 32,000 crore of subsidy amount from 2018-19 to the next fiscal in order to maintain its revised fiscal deficit target at 3.4%.

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