Panel to consider allowing private companies to sell subsidised LPG
The government has set up an expert panel to consider allowing private firms to sell subsidised cooking gas — a long-standing demand for companies like Reliance IndustriesNSE 0.32 % because state firms dominate the market by luring customers with a lot of subsidies.
Reliance Industries, which runs the world’s biggest refinery at Jamnagar, is a big producer of LPG and has been lobbying the government for years to permit private players to distribute subsidised cylinders.
State oil firms sell cylinders to customers at market price but buyers are soon paid the subsidy in their bank accounts, which makes the fuel effectively much cheaper than what is sold by private companies.
The oil ministry has set up a panel comprising five members including economist Kirit Parikh, former petroleum secretary GC Chaturvedi, former Indian OilNSE -1.92 % chairman MA Pathan, IIM Ahmedabad director Errol D’souza, and a joint secretary in the petroleum ministry. The panel has to submit report by July-end.
The panel has the same experts who were in the committee that recently recommended policy reforms regarding the setting up of petrol pumps, one key measure being eliminating the condition of investing ?2,000 crore in the oil sector to obtain fuel retail license.
The Terms of Reference of the expert committee on the marketing of liquefied petroleum gas (LPG) include “review the existing structure of LPG marketing in the country and assess whether competition should be allowed in marketing of a controlled commodity which is deficient in the country,” a recent memo by the oil ministry said.
The panel will also “assess the need, if any, to liberalise government policies to increase the participation of private sector in LPG marketing in the country.”
Reliance serves about a million cooking gas customers across several states, which is tiny compared to country’s customer base of 26.5 million. The country’s cooking gas customer population has exploded in recent years due to the government’s focus on taking cleaner fuel to more homes. About 20 million customers do not receive subsidy — a potentially attractive segment private players can hope to lure with better services.
India has become the world’s second-largest LPG consumer. It consumed 24.9 million metric tonnes of LPG in 2018-19, of which nearly half was imported.
The Economic Times 11-06-19