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September sees near-flat growth in LPG demand

Ajay Modi/New Delhi 23 Oct 12 | 12:14 AM

September saw an unusually flat demand for liquefied petroleum gas (LPG) cylinders. It had grown five per cent in the previous month. Notably, the drop in demand for LPG came after the Centre’s decision to cap subsidised LPG cylinders at six a year.

“Sales growth of LPG used to be five-six per cent before the government imposed a subsidy cap. It has now fallen to near negligible. Such a flat demand growth has not been seen in recent history," said M Nene, director (marketing) at Indian Oil.

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Besides, oil marketing companies have been clamping down on diversion. “Diversion is getting checked both at the dealer and at the consumer level," said Nene. According to the petroleum planning and analysis cell (PPAC) of the petroleum ministry, LPG consumption growth stood at five per cent in August. Consumption grew 7.2 per cent last financial year and 9.1 per cent in FY11.

Considering India meets part of its requirement from imported LPG, the drop in demand could be a good sign.

Currently, subsidised cylinders are priced at Rs 410 in Delhi, while the market price is Rs 894. For the period between September 13, 2012 and March 31, 2013, consumers are eligible for another three subsidised cylinders, but they will have to pay market price from the fourth cylinder onwards.

Beginning April 1, 2013, a consumer can avail only up to six cylinders every year at subsidised rates; additional cylinders will have to be bought at the market price.

When the decision to cap LPG subsidy was taken last month, the market price of domestic LPG was Rs 756 per cylinder in the capital, while the subsidised price was Rs 399. After the monthly price revision in October in line with international prices, the market price of domestic LPG jumped to Rs 894. A hike in dealers’ commission also resulted in a marginal increase in the price of subsidised LPG cylinders, to Rs 410.

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