HPCL-Total's second cavern plan faces LPG cap hurdle

Company had planned to set up LPG storage facility in Mangalore

State-run oil marketing company Hindustan Petroleum Corporation Ltd (HPCL)’s plan to set up a second underground storage facility for liquefied petroleum gas (LPG) in Mangalore has hit a roadblock, thanks to the ceiling on number of LPG cylinders a year for a household.

HPCL had in January told Business Standard it planned to invest Rs 700 crore for setting up another 60,000-tonne LPG underground storage facility,  also called an LPG cavern, at Mangalore with French partner Total SA. “When we conceived the idea, we thought with the growing demand for LPG in the country, a new cavern made commercial sense. But after a cap (on the number of)  cylinders, demand for LPG cylinders in the country has come down. In this case, we need to re-asses the need for setting up another cavern,” said a senior HPCL official. According to data from the petroleum planning and analysis cell, demand for LPG has in the past year come off. While demand for LPG in June 2012 was 1,295 thousand tonnes, for June 2013, it came down six per cent to 1,217 thousand tonnes. 

The demand came down 4.7 per cent from 1,316 thousand tonnes in May 2012 to 1,254 thousand tonnes in May 2013. The ministry of petroleum and natural gas had last September decided to limit the number of subsidised cooking gas cylinders to households at nine. Beyond the ninth cylinder, a consumer has to pay the market price of Rs 950 for a 14.2-kg cylinder. The subsidised price for an LPG cylinder in Mumbai today is Rs 441 and in New Delhi, Rs 410.50. The scheme aims at curbing leakages, preventing black marketing and sending the subsidy directly to consumers’ bank accounts. In this regard, the government in June launched the Direct Benefits Transfer scheme, in which LPG consumers get Rs 435 in their accounts when they book an LPG cylinder. The consumers are expected to use this cash subsidy to buy an LPG refill at the market price.

The scheme, which has been rolled out in 35 districts so far, will be extended to the rest of the country by this year end.  The districts selected have high Aadhaar or unique identification number penetration.