Private LPG bottlers may shine as govt plans to add 10 crore consumers

NEW DELHI: The government’s ambitious plan to enroll 10 crore new cooking gas consumers in three years is set to throw open big opportunities for private liquefied petroleum gas (LPG) bottlers.

The oil ministry recently asked state oil firms to prepare a model for participation of private players in setting up cooking gas bottling plants as the public sector’s planned bottling expansion may not be enough to meet the entire projected demand in the coming years, an official said. If the idea takes off, private bottlers, which have just a minor presence now, could help meet a large part of the new refill demand from state LPG distributors such as Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum.

Fixing logistics is the biggest challenge in the government’s plan to enhance LPG consumer base by 60% in three years. This means appointment of thousands of LPG distributors across the country, especially in the interiors where the new consumers are likely to mostly come from, and setting up scores of bottling plants to churn out refills in time for new consumers.

The state oil firms currently have 188 LPG bottling plants with a bottling capacity of around 15.2 million metric tonne per annum. State firms sold nearly 17.2 million tonne in 2015-16, mainly helped by more than 100% capacity utilization at several plants and some help from private players.

But with the projected demand of 20.7 million tonne in 2016-17 and 24 million tonne in 2018-19, as per industry executives, the state firms would need rapid expansion of their bottling facility.

The state firms plan to erect 14 new bottling plants by March 2019, adding 1 million tonne annual capacity, state oil companies’ executives said, adding that another nearly 3 million tonne capacity will be enhanced by adding carousals and shifts at existing plants.

This would still leave a projected demand-supply gap, which is what the government wants the private players to fill. In some locations today, state firms source LPG refills from a handful of private bottling plants currently operating.

Some of the private players run bottling plants and distribute non-subsidized LPG cylinders under what is called parallel marketing. Reliance Industries has recently sought the government permission to distribute subsidized cylinders to households as subsidy is now transferred directly to cooking gas consumers’ respective bank accounts.

Once a model for private participation is prepared, it would pave way for private bottlers who would have a reliable clientele in state oil firms.