Lpg Market Prospects in India

Topics: Supply and demand, Liquefied petroleum gas, Rural Pages: 6 (1777 words) Published: September 18, 2011


According to the latest scenario of the Natural Gas Analysis, the Natural Gas market in India is expected to be the one of the fastest growing in the world during the next two decades. Among its segments LPG has made a substantial progress to become the most convenient, cost effective and pollution free means of fuel, especially in the middle class segment. LPG market in India is not at all versatile and competitive. It’s a part of the Indian economy is still untouched by privatization. After 1991, many companies tried jumping in the LPG market but could not survive against Government OMCs like IOCL, HPCL and BPCL. The reason behind such failure is the heavy subsidy given by the Government in domestic LPG. The commercial and Industrial LPG is unsubsidized because of which companies like RIL and Assar are giving tough competition to PSUs in this section. Heavy subsidy on domestic LPG creates a no entry for any private player. For a foreign entrant there is a great scope in the non-subsidized and commercial sector. For inviting the private players, government should publicize auto gas (LPG) as a major fuel for automobiles. In a deregulated market, LPG is closely linked to the international prices, and these have fluctuated significantly in recent years. India is the fourth largest consumer of LPG in the world after USA, China & Japan. India is the third largest consumer of LPG in domestic sector in the world after China and USA. The market of LPG is lies in two sectors namely industrial & commercial LPG and subsidized Domestic LPG. The ratio of customers of domestic and non-domestic LPG is 9:1. Three Million Liquefied Petroleum Gas cylinders are supplied in the Indian households for cooking food per day. There is a steady growth of 8% per annum in LPG Consumption in India according to the latest figures and the Compound Annual Growth Rate for the fiscal years 2011-2013 will be around 9%. The main reason for the growth of this segment is fast urbanization and rising income levels in the country that has fuelled up the LPG demand. Moreover, in the villages LPG is becoming the most favourable source of cooking and vehicle fuels. The main supply issues for LPG in the Indian market are current shortages, increasing demand and supply imbalances, international supply and price volatility and the dependence on imports strategically. The supply issues in the LPG market India are transport, storage, bottling infrastructure, widely dispersed demand and consumer interests. The subsidies are needed for support in the relaxation in prices but it imposes heavy burden on exchequer. The subsidy basically imposes a financial disadvantage due to its poor efficiency of use. The government should impose earmarked taxes for the sake of subsidies to decrease the overall price of the LPG and hence increase the supply to the rural market and thereby capture more and more consumers from the rural households Many Companies tried to jump into the LPG Market but weren’t able to survive the monopoly of the Indian governments’ companies like IOCL, HPCL and BPCL. The reason behind this was the heavy subsidies paid by the government which they couldn’t afford to pay keeping in view the market prospects of LPG. The commercial and industrial use of LPG is unsubsidized, hence some companies like RIL and Assar gave tough competition in this sector.


LPG Penetration in Domestic Sector:

Population in million| 286.11million| 742.49 million| 1210 million| Households in million| 95| 159| 254|
LPG Connections in million| 83.8| 31.2| 115.0|
Penetration of LPG| 88%| 19.6%| 45%|

Potential in Rural India:
•61.3% of Indian Population lives in rural areas
•87% of villages have population less than 2000
Encouraging Facts about Rural Market:
•Increase in Purchasing Power
•Improving Literacy Levels
•Imparting Functional...
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