Distribution & Retailing Of LPG In India

2009
SCHOOL OF PETROLEUM MANAGEMENT
GANDHINAGAR

GROUP 1

DISTRIBUTION AND RETAILING
OF LPG IN INDIA

DISTRIBUTION AND RETAILING OF LPG IN INDIA September 12, 2009

Acknowledgement
We would especially like to thank Mr. Shaleen Sood (Asst. Manager Sales, Ahmedabad; BPCL)
for helping us understand the complete supply chain of the LPG business. The various
information provided by him helped in making an exhaustive report. The report quality has also
been enhanced because of sharing of his practical experience.

We would also like to thank Mr. Rajendra Pandey (Dealer, Priya Gas Agency) for giving us
detailed knowledge about the distribution and retailing of LPG. His sharing of knowledge helped
us to understand the LPG business from a dealer’s point of view.

We are also grateful to Mrs. Parul Sharma and Mrs. Minali Parikh (BPCL, LPG Customers) for
sharing their viewpoint related to customer service and support, and perception regarding
different brands.

The timely help from our lecturer, Mr. Prasoon Aggarwal, for giving us the right contact person
in BPCL, is thankfully acknowledged.

At last we would like to thank our lecturer, Mr. Ramendra Singh, for giving us detailed
knowledge related to marketing tactics used by the OMCs. This helped us greatly in the pre-
preparation for the project.

2 Introduction | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


Executive Summary
This project deals with the LPG business in India. The focus is pertaining to the retailing and
distribution of LPG. We start with the basics of LPG, its constituents and how it is produced.
Following to it the demand supply scenario and the major players in the business in India have
been discussed. The supply chain of the LPG business, starting right from procuring, storage,
retailing and distribution processes have been explained in details. Next comes the marketing of
LPG, which had unique characteristics because of the fact the product cannot be seen either by
the producer neither the consumer. Therefore it is important from the company’s point of view to
create a perception in the minds of the consumer that of reliability and safety.

The market segment consists of Domestic, Commercial and Industrial segment and the
marketing as well as the pricing policies varies accordingly. One of the biggest challenges of the
business of LPG is the diversion of the cylinders from the Domestic segment to the Commercial
and Industrial segment. It is in the interest of the company to orient the distributor and
consumers according to the regulations of the business. The motivation arises from the
subsidized price of Domestic LPG, which is not the case in Commercial and Industrial segment.

Finally, the competitive environment of the business has been analyzed. The intra Oil Marketing
Company’s competition, as well as the competition between Oil Marketing Companies and
Parallel Marketing Companies has been explained. Again, the threat from one of the most potent
substitute of LPG, Piped Natural Gas has been analyzed. Though LPG is a more efficient fuel
than Natural gas (higher calorific value), but the advantages in case of Natural gas outweighs the
LPG by some amount. Until the infrastructure for distribution of Natural gas is present,
Liquefied Petroleum Gas will continue to be in existence, though to make this business viable the
abolition of the subsidy regime needs to be implemented.



Contents
1. Introduction ............................................................................................................................... 5

2. LPG in India – Overview ........................................................................................................ 6

Demand Supply Scenario ..................................................................................................................... 6
Major Players ...................................................................................................................................... 6

3. Understanding LPG Supply Chain ...................................................................................... 7

Procurement ....................................................................................................................................... 7
Storage ................................................................................................................................................ 7
Distribution and Retailing .................................................................................................................... 7

4. LPG Marketing .......................................................................................................................... 9

Market Segments .............................................................................................................................. 10
Brand Positioning .............................................................................................................................. 10
Internal Marketing............................................................................................................................. 11
Customer Retention Techniques ........................................................................................................ 12

5. Challenges of LPG Business ................................................................................................ 13

6. LPG Programs in India .......................................................................................................... 16

Deepam LPG scheme ......................................................................................................................... 16
Rajiv Gandhi Gramin LPG Vitrak ......................................................................................................... 17

7. Competitive Environment .................................................................................................. 19

Business Rivalries............................................................................................................................... 19
Inter OMC competition .................................................................................................................. 19
OMC-PMC competition .................................................................................................................. 19
Threat from Substitutes ..................................................................................................................... 20

8. Conclusion ................................................................................................................................ 21

Exhibits .............................................................................................................................................. 22



1. Introduction

LPG i.e. Liquefied Petroleum Gas is a mixture of Propane and Butane and with tertiary gases. In
India, distribution of LPG began with Burma Shell Corporation in 1955. It started as an
alternative to the then popular fuels of India, Coal, Kerosene, wood and Dried Dung Cake. As
per its prices, it was not feasible even to the then middle class to shift to LPG. So, government
promoted LPG by providing subsidy during connection and later on base of per unit of gas.
Government Policy acted as a spark to the fuel. No sooner, there was a long list of applications
for registration of connection. Oil companies had not planned for such demand in terms of
cylinders, gas and distribution points. Slowly, mass production of gas cylinders started in India
with rising imports of LPG from middle-east countries and that lead to easing the supply demand
gap.

LPG in itself is largely a mixture of Propane and Butane with a high calorific value of 50,350
kJ/kg and 49, 510 kJ/kg. This differentiation leads to difference in LPG supplied to Industrial
and Domestic Sector. Industrial is 70% propane and 30% butane whereas for domestic the values
reverse as 30% propane and 70% butane. This value varies with season as well; in winter, it’s
more propane and in summers, it’s more of butane.

In India, LPG finds is prime usage in Domestic sector with 92.3% consumption in households.
3.4% in commercial sector and 2.4% as Auto LPG and 1.9% in Industry. In 2001, 17.5% of the
households using LPG used it as their primary cooking fuel though the share of firewood as
primary fuel was 52% and 10% each on Crop Residue and Cow dung Cake.

Currently, the LPG business is fragmented in two parts: Industrial & Commercial LPG and
subsidized Domestic LPG. Both businesses run on base of understanding & regulation. Industrial
& Commercial LPG is a more competitive business segment than the Domestic LPG as it has
competition between OMCs and PMCs together. In Domestic LPG, only OMCs operate and
competition is largely limited by dividing boundaries of area for distribution of LPG.



2. LPG in India – Overview

Demand Supply Scenario
LPG in India is largely a regulated market. Pricing and allocation of Distribution joints is
decided by corresponding bodies. Demand for LPG in the Year 2007-08 was 10178 TMT
corresponding to supply level of 11, 278 MMTPA. This supply consisted of 55% from PSU
OMCs, 25% from Essar & RIL and remaining 20% from imports. In the year 2004-2008,
demand stood at 90-95% of Supply. On January 1, 2007 there were 181 bottling plants across
India 49% owned by IOCL, 27% by BPCL & NRL and 23% by HPCL. Bottling plants had a
capacity of bottling 8987 MMTPA as on April1, 2009. There were 9366 distributors of LPG on
the same date with 73% presence in urban area and 12.5% each in Urban/Rural and Rural area.
Demand for LPG is growing at a rate of 6% per annum whereas supply is not constant and gap is
filled by imports.
The LPG being distributed is in 4 cylinder sizes. Domestic Cylinder: 5 kg & 14.2 kg,
Commercial Cylinder: 19 kg and Industrial Cylinder 35 kg. LPG for Domestic customers is
supplied at a subsidized rate and for industrial & commercial rate is market determined. This
difference in pricing scheme often lead to black marketing but companies are now a days vigilant
enough to inhibit this practice. HPCL as a pioneer is including GPS device in its cylinders to
restrain the fraudulent practice.

Major Players
In India, share of LPG retailing largely depends on the LPG producing capacity of its refineries.
IOCL has the highest number of refineries and largest capacity for producing LPG. It leads the
market with 49% share, 27% by BPCL & NRL, and 23% by HPCL. In the PMCs, major players
are RIL and Essar. These two companies generate 90-95% of their revenue from the Commercial
and Industrial segment. The combined LPG producing capacity of RIL & Essar is 3% of the total
indigenous LPG production capacity of India.

6 LPG in India – Overview | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


3. Understanding LPG Supply Chain

Procurement
In India, LPG is either imported from outside or is 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.

Storage
From both, the ports and the refineries, LPG is brought to the large storage facilities with the use
of pipelines. Here the LPG is stored under highly refrigerated and pressurised condition.

Pipeline

Pipeline

Oil Refinery

Distribution and Retailing
From the storage facilities, LPG is directly distributed to bulk industrial purchasers via large bulk
road tankers. For the domestic customers, LPG is distributed in packed form through dealers.
Dealer holds the stock of filled cylinders. When the customer’s LPG cylinder is emptied, it is
replaced by the local operating dealer at the customer’s location itself. The dealer recovers the
cost of transporting cylinders from commission on a per refill basis. A group of dealers in a
given area receive the filled cylinders from the designated bottling plant. A dealer sends the
empty cylinders to the required bottling stations via truck. These bottling plants take back the
empty cylinders and load the truck with the filled ones. The filled cylinders are then sent back to

7 Understanding LPG Supply Chain | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


the dealer. The various bottling plants in turn receive the LPG from storage facilities with the use
of tankers. The tankers are dedicated to transporting LPG, and hence, the company pays the
transporters for both delivery and return trips to the storage facilities.

Tanker

Cylinder Distribution

Tanker

Storage Facility

LPG Supply Chain Bottling Plant

Dealer Location

8 Understanding LPG Supply Chain | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


4. LPG Marketing

Till September, 1993 LPG 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 difficulty, Government issued a notification,
dated 3rd August, 1993 introducing the concept of Parallel Marketing Scheme (PMS). Under
PMS, parallel marketers (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.

Following are the details of LPG Sales by OMCs and parallel marketers till 2003-04:-
OMC's sales

(Fig. in TMT)
Year Domestic Non-Domestic Total
Packed Bulk
2001-02 7,040 171 99 7,310
2002-03 7,737 208 198 8,143
2003-04 8,789 105 181 9,075

PMS Sales

Year TMT
2001-02 178
2002-03 208
2003-04 216

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
9 LPG Marketing | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


commercial/industrial sectors (about 85-90% of the sales of parallel marketers are in these
sectors). Exhibit 01 shows the number of consumers of LPG till April, 2008 state-wise and
Exhibit 02 shows the growth in LPG marketing in India.

Market 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%). Accordingly the weight
of the cylinder varies (standard weights), as the usage depends on the type of consumer and to
lessen the transportation cost. In the industrial category, there are bulk users too, who are served
in bullets (huge tanks). The subsidized price of LPG is provided only for the domestic segment,
and the commercial and industrial rates are as per the market decided prices.

Brand Positioning
One of the important features is that neither the business persons nor the consumers are able to
see the product, therefore building the perception of trust and importance in the minds of the
consumers makes a difference. Deliverability assurance and Safety measures is one of the key
features of the company providing the service.
As mentioned before that LPG business is mostly self-propelled. Demand, in absence of any
other substitute fuel as of now, implies that it overshoots the Supply. Thus some direct marketing
measures are implemented in the form of pamphlets and stuff and some customer awareness
programmes in mass media.



Internal Marketing
Though the LPG business is ruled by the domestic clients, the subsidy regime doesn’t allow the
companies to eke out profit from this division. Industry and commercial segment provides the
revenues but not enough to compensate for the losses made in the domestic segment. Thus, the
LPG SBU is a loss making unit.
Internal marketing is important to orient the distributors, who are the interface between the
consumers and the company, to act in accordance with ethics and see that there is no diversion of
cylinders. This arbitrage incentive is due to the fact, that domestic cylinders are priced low and
hence commercial enterprises have a tendency to acquire those at a premium, though lesser than
the designated commercial LPG product.
The steps taken by the Government of India/OMCs (oil marketing companies) to prevent
diversion of domestic cylinders are as under. Exhibit 03 depicts the penalties that have been
imposed in case of any breach of law.

The supplies made are adequate to meet the genuine domestic needs
of domestic customers. Necessary steps are taken to augment the
supplies to the distributors arising out of unusual circumstances or
development of events.
• Customer contacts are done for customers with high consumption
levels to confirm genuineness of refill supplies made.

Refill audits are being conducted at distributorship of oil companies to
find out possible diversion of domestic cylinders for non-domestic use.

• Press releases are issued periodically against misuse of domestic
cylinders for commercial purposes. Customer awareness campaigns
are conducted periodically. Banners are displayed and also
pamphlets are distributed periodically to bring awareness in public.



Customer Retention Techniques
The LPG business is mostly self propelled and doesn’t need much marketing measures. In the
domestic category, the distributor represents the company and mostly the consumer chooses that
distributor which is closest to his/her locality. Though there are a few factors which improve the
service level of the business:

Booking through telephone or net

Prompt and assured delivery

Behavioural patterns shown by the delivery people

Safety and Authenticity (seal) of LPG cylinders

Again, few OMCs started taking measures to improve consumer satisfaction by providing home
delivery service of household goods by collaborating with Haldiram’s and other retail goods
providers. The commission is shared amongst the distributor and the company in the ratio of
70:30.
For the industrial and consumers the reliability of providing the LPG cylinders in normal as well
as emergency times is of utmost priority, as the opportunity cost is huge in industry. Another
important aspect is the price of LPG, as the prices charged by the company is not regulated and
hence can be tinkered with.



5. Challenges of LPG Business

Supply & accessibility
In order to meet the increasing demand of LPG by domestic as well as auto fueling sectors the
country needs additional L PG production capacity, adequate transportation (pipelines & rail
tank wagons), and distribution network.
During the calendar year 2008, the actual sale of LPG was 11820 TMT against the total
indigenous LPG availability of 9228 TMT. The shortfall was made up by importing LPG to the
tune of 2759 TMT. For the year 2009, Total LPG imports of 3112 TMT have been planned
against the projected demand of 12570 TMT at a growth of 6%.

Supply of reliable cylinders
Another challenge pertaining to LPG distribution is assuring the reliable supply of refill
cylinders. For small and remote markets, refills may be delivered once a week or once every
other week. For those users that do not keep a second cylinder, this could mean going without
fuel for as long as two weeks. Signing up for two cylinders to avoid running out of cooking fuel
would further increase the start-up cost of LPG service. Again, this infrequent delivery of refill
cylinders serves as a disincentive against switching entirely to LPG.

Cylinder management
As we know that LPG has to be stored under pressure, metal cylinders are required. To cover the
cost of cylinder manufacture, an initial deposit fee is required. The combination of the start-up
cost and the cash outlay at each refill (which typically cannot be broken up into smaller
installments) presents a serious barrier to the uptake and regular use of LPG by low-income
households.

Import challenges
The LPG import requirement during the year 2009 is estimated to be about 4.7 MMT. The
stretched import capacity of the industry at present is about 414 TMT/month which equals to
approximately 5.0 MMTpa. International factors such as seasonal variations, changes in
international politics cause the problems.

13 Challenges of LPG Business | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


Diversion of LPG cylinders
The reason for diversion of domestic cylinders by distributors is because the domestic LPG is
subsidized. The selling price of domestic cylinders is less as compared to the commercial
cylinder selling price which is fixed on the actual Import parity price. There is a wide difference
between the domestic and commercial rates. Due to this most of the supply intended to go to
domestic consumers are transferred to commercial consumers which results in shortage for above
said consumer base.

Affordability
The economically disadvantaged face the problems of high first costs of LPG (connection and
equipment), and the lumpiness of relatively high refilling bills, and loans are difficult to service
without financial returns from the investment.
On comparing the fuel rates for different fuels, we see that the expenditure occurred for using
LPG is much more costly as compare to others. For example LPG stoves are required to be
designed to operate at 60 percent efficiency or higher, field measurements show efficiencies
considerably lower than the design specifications. If we assume 50 percent stove efficiency for
LPG, 35 percent for kerosene in wick stoves, and 40 percent for kerosene in high-pressure stoves
(where kerosene is gasified before combustion).a 14.2 kg cylinder of LPG is equivalent to 21
litres of kerosene as liquid and 19 litres gasified kerosene. Expressed in rupees per mega-joule
(MJ) of energy delivered, LPG is more expensive than kerosene for low income group
population.

Pricing policies
These are a challenge, particularly because of the subsidies already offered. The subsidies do not
reach most of the poor as they are not yet users of LPG, there is diversion of subsidized LPG
from domestic to other uses, and there is also a heavy burden on the central exchequer.
As per the Subsidy Scheme notified by the Government, OMCs are only allowed to market
subsidized domestic LPG. The present total subsidy on domestic LPG marketed by OMCs is
Rs.7.94 per Kg (Rs.112.77 per 14.2 Kg cylinder). Of this, Government is paying Rs.2.86 per Kg
(Rs. 40.65 per 14.2Kg cylinder) and Oil Companies are incurring loss of the balance Rs.5.08 per
Kg (Rs.72.12 per 14.2Kg cylinder). Out of the loss incurred on domestic LPG sales, as per the



subsidy sharing mechanism, ONGC, GAIL and OIL are sharing 1/3rd and the rest is borne by
OMCs. If producers like RIL, ONGC, GAIL and OIL are to be allowed to market subsidized
domestic LPG, they would have to follow price regulation and bear losses. Again, LPG
producers, especially private producers, may not be interested in selling subsidized domestic
LPG under the subsidy scheme. It also possesses a challenge for the government to ensure the
supply of subsidized product to domestic consumers & prevent its diversion to non domestic
purposes.



6. LPG Programs in India

Deepam LPG scheme
An important scheme implemented for the expansion of domestic LPG use has been the Deepam
LPG scheme in the state of Andhra Pradesh. This project was launched on the 9th July 1999 for
the distribution of domestic connections to women of below the poverty line (BPL) 41 families
in the rural areas of the state. Each connection was accompanied by a one-off subsidy to the
extent of the initial cost, to overcome the barrier to fuel switching. It was meant to reduce
dependence on firewood, reduce the drudgery of collection of/cooking on firewood, reduce
pollution and improve the health of women. Salient features of this scheme are:
The scheme was administered by the State government Departments of Rural
Development and Civil Supplies and distributed through OMCs.
The High Court directed that the scheme be confined only to “white cardholders” (i.e.
those below Rs 11,000/year/family).
The Department of Rural Development identified the beneficiaries; a target of 1.154
million spread over 22 districts was indicated. Later, the numbers were increased so that
by 2002 about 1.724 beneficiaries (including some of the urban poor) were listed.
The lists were given to the LPG dealers of the oil companies, who were also expected to
ensure training of the allotted in the use of LPG stoves.
The Department of Civil Supplies provided a one-time deposit of Rs 1,000/connection
towards the cylinder and regulator.
Results in terms of the number of connections allotted: till March 2002, 88% of the urban
target and 91% of the rural target had been met (NIRD, 2002).
Learnings from Deepam Scheme
The scheme was not very efficacious, because although all white-card holders
participated, over 80% of non-white card-holders in the region also did.
The retention rate was down to 85% in less than three years because of cylinders having
been given away to relatives and being lent to civil servants in local areas (NIRD, 2002).
Factors affecting the refill rate were: distance from distribution points, and the season i.e.,
there is higher demand during the monsoons.

16 LPG Programs in India | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


Participants’ perceived advantages of LPG were: timesaving, social status, cleaner
environment, and help during the monsoons. LPG was found useful chiefly during the
rainy season because of more employment (implying more cash available for refuelling),
more labour demand and moisture making collection and preservation of biomass
difficult. The scheme itself was considered attractive because of the initial fee waiver.
However, the perceived disadvantages were: implementation bottlenecks, reduction in
kerosene quota (in municipal areas), high refill costs of refills, and unwanted envy of
non-beneficiaries.
Implementation bottlenecks within the scheme that contributed to dissatisfaction
included: limited choice, inability of suppliers to supply stoves and accessories on time,
co-ordination problems at the local level for the supply arrangements, and irregularities
with beneficiaries also having to incur Rs 5 – 30 extra, per cylinder, for
collection/delivery.
Suggestions from local self help groups (SHGs) for improvement include: credit for
refills and reduction in cylinder size.

Rajiv Gandhi Gramin LPG Vitrak
Ministry of Petroleum & Natural Gas has formulated a scheme, namely, Rajiv Gandhi Gramin
LPG Vitrak Yojna, which is going to be launched very soon. This envisages the increase in LPG
population coverage from 50% to almost 75% by 2015. The scheme is primarily to reach LPG in
villages, so that dependence on conventional fuels like wood, coal etc. is reduced. This will not
only help in conservation of forests but will also have positive impact on environment as well as
on the health of our rural womenfolk.
This Scheme would be implemented by the Oil Marketing Companies (OMCs) namely Indian
Oil Corporation Limited (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan
Petroleum Corporation Limited (HPCL) in addition to their Marketing Plan for setting up regular
LPG distributorships. Identification of locations would be finalized by the OMCs based on the
present penetration/coverage, minimum refill/sale potential for sustaining the RGGLV.
According to the program, the program will be sustainable for cluster of villages having about
4000 families and consumption of 7 kg per month, out of which half may go for LPG. Contrary



to 2500 cylinders, GLV will be set up with the potential of 1000 cylinders. The net income for
the proprietor expected is Rs 7664/- per month. The selection of the candidate will be done by
draw system. RGGLV will be setup by OMC who have its bottling plant nearest to the identified
cluster of villages.



7. Competitive Environment

Business Rivalries
There are mainly two categories of competitions existing in Indian LPG industry. They are as
follows:
1. Inter OMC competition
2. Inter OMC-PMC competition

Inter OMC competition
OMC’s is India is seen as the facilitator to the nation’s development. Hence, apart from churning
profit for sustainable existence and growth, it has to operate in accordance with the nation’s
interest. That’s why OMC’s are regulated such that to avoid unwanted friction among themselves
and concentrate their whole energy to nation’s cause. So, there exists a special type of
competition among the OMC’s of India.
In domestic segment, OMC has to sell its product at a price decided by the government. So, there
exists no scope of price war, which leaves the OMCs to compete on market share. But, to avoid
unwanted friction and hence deadweight loss to the society, the regulatory body, MOPMG tries
to maintain the optimum number of dealers in an area. In order to that the number of dealerships
of a company is decided by the committee in accordance to their market share and presence in
the region. Hence, chances of competition for market share in domestic segment are also very
limited.
Though, in industrial segment, with lack of price regulation and hence better scope for margin
there is an intense competition in the form of:
1. Price
2. Service
3. Promptness in delivery
4. Hours of catering or working hours

OMC-PMC competition
PMC, due to subsidized price prevailing in the domestic segment has not shown any interest to
compete with the OMCs. But, in industrial segment it is giving OMCs run for their money.

19 Competitive Environment | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


Threat from Substitutes
Today, PNG is considered to be most eligible fuel to replace LPG. Few, properties of PNG
which are regarded as giving it an edge over LPG are follows:
PNG is Convenient
24 hours uninterrupted gas supply
No changing or handling of gas cylinders
No more last minute emergency
Make payments after you consume, through banks, drop boxes, ECS, Net, etc.
PNG is economical, works out to be up to 10% cheaper than LPG,
14.2 kg. LPG is equivalent to 18 units of Natural Gas shown in your meter. At present,
price of LPG is Rs. 255/- you consume Gas costing Rs. 205/- only, saving Rs. 50/-
(approx.) every time.

PNG is Safe:
Natural Gas catches fire only when it forms a 5-15% mixture with air whereas LPG catches fire
when it forms 2% or above mixture with air.
Our supply designs, executions and operations are being done as Per International best
Practices.

PNG is Clean:
Being a gaseous fuel, very clean compared to any other fuel with more than 94%.
Combustible particles.
Burns with a flame always hence, no blackening of vessels.
Sulphur content less than 10 PPM.
Most preferred fuel in vehicles in Mumbai today.
Contribution for a cleaner society.

PNG is versatile
Apart from cooking, other appliances like geyser, air conditioner, vehicles etc. can be
used on Natural Gas. However, please do not attempt to alter/modify the existing
installation yourself or through any unauthorized person.

20 Competitive Environment | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


8. Conclusion

We have seen the contrast between the different market segments prevailing in Indian LPG
industry. To be more precise, we saw how the domestic segment is quite different from its
counterpart industrial and bulk segment, be it the implications of subsidy, demands of users or
the interference from the government. Further, we studied the supply and logistic involved in
LPG distribution and how the number of agencies in a region are optimized to reduce the dead
weight loss to the society. We had also focused on the marketing strategy which we found to be
difficult or at least peculiar, due to the fact that customer couldn’t see the product which makes it
by large homogenous.

Lastly, we dealt with the scope of growth for LPG in Indian market and threat from its close and
worthy substitute; PNG.

21 Conclusion | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


Exhibits

State-wise and Company-wise LPG Domestic Consumers (As on 1.4.2008)
('000 Number)
State / UT As on 1.4.2008 Total as on 1.4.2007
IOCL/AOD HPCL BPCL Total (Col.2-5)
1 2 4 5 6 7
States
Andhra Pradesh 4090 4427 2290 10806 10342
Arunachal Pradesh 123 0 0 123 116
Assam 1834 24 61 1919 1813
Bihar 1688 315 370 2373 2254
Chhattisgarh 558 327 169 1054 987
Delhi 2656 551 908 4115 4011
Goa 9 244 146 399 391
Gujarat 2980 1073 1217 5270 5067
Haryana 1621 583 1053 3257 3088
Himachal Pradesh 1039 141 71 1252 1179
Jammu & Kashmir 390 824 143 1358 1327
Jharkhand 812 162 129 1103 1026
Karnataka 2375 1835 1361 5571 5225
Kerala 3021 751 1584 5357 5046
Madhya Pradesh 2194 1078 840 4112 3875
Maharashtra 1519 5346 6008 12873 12415
Manipur 218 0 0 218 206
Meghalaya 109 0 0 109 101
Mizoram 188 0 0 188 181
Nagaland 140 0 0 140 129
Orissa 558 624 276 1458 1395
Punjab 2663 882 1097 4642 4406
Rajasthan 1791 1032 1250 4073 3861
Sikkim 114 0 0 114 109
Tamil Nadu 6183 1079 2595 9856 8798
Tripura 256 0 0 256 238
Uttar Pradesh 6202 1361 2687 10250 9688
Uttaranchal 1247 71 183 1501 1428
West Bengal 3447 969 704 5120 4807
Union Territories
Andaman & Nicobar 53 0 0 53 51
Chandigarh 206 66 46 318 313
Dadra & Nagar Haveli 0 30 0 30 30
Daman & Diu 0 26 16 42 40
Lakshadweep 3 0 0 3 2.6
Puducherry 115 91 47 253 230
Grand Total 50397 23912 25252 99562 94180
Source. Public Sector Undertakings.
Exhibit: 01

22 Exhibits | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR


Growth in LPG Marketing in India

Item Unit Growth in LPG Marketing
2005-06 2006-07 2007-08 2008-09 (P)
Indigenous Production TMT 7717 8454 6743 7008
Imports - PSUs TMT 2450 1968 2156 1937
Imports - Pvt. TMT 433 321 676 409
Consumption - PSUs TMT 9976 10530 11482 11775
Customer Enrolment Lakhs 44.9 53.9 64.9 53.2
Year-End Position
LPG Customers - PSUs* Lakhs 886 949 1018 1068
LPG Distributors - PSUs Nos. 9270 9363 9365 9366
LPG Markets Nos. 4288 4359 4393 4420
Bottling Capacity TMTPA 8122 8448 8697 8967
(P) Provisional
* Domestic And Non-Domestic
Source: Oil Companies

Exhibit: 02

Details of Provisions of Control Order/MDG/DA to Contain Diversion of Domestic
LPG for Unintended Purposes

Marketing Discipline Guidelines (MDG) 2001 has been implemented which imposes heavy
penalty including termination of distributors found indulging in diversion. Specific provision for
this under MDG is mentioned below:

Irregularity Penal Action

1st instance 2nd instance 3rd instance

Diversion of Fine of Rs 20,000 and Fine of Rs 50,000 and Termination
domestic cylinder recovery of differential in recovery of differential in
to non-domestic retail selling price of 14.2 retail selling price of 14.2 kg
use kg cylinder and 19 kg cylinder and 19 kg cylinder
cylinder on per on per cylinder basis.
cylinder basis.

Exhibit: 03

23 Exhibits | SCHOOL OF PETROLEUM MANAGEMENT GANDHINAGAR

Distribution & Retailing Of LPG In India

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