Essar Oil eyes foray into LPG distribution biz

In the non-subsidied LPG distribution business, Essar Oil looks to target customers with an annual income of Rs 10 lakh and above

Refiner Essar Oil Ltd wants to enter the liquefied petroleum gas (LPG) distribution business in the country, said an Essar Oil official on Monday.

Mahesh Advani, head, direct sales, Essar Oil, said the company was open to both subsidised and non-subsidised LPG distribution business in the country.   

At present, Essar produces about one million tonnes of LPG, Advani said. In the non-subsidied LPG distribution business, Essar Oil looks to target those earning more than Rs 10 lakh a year, and not receiving subsidy on purchase of LPG cylinders.

Advani from Essar Oil added, the company expects better margins by selling LPG directly to customers, than to state oil marketing companies. At present, Essar Oil sells its LPG to oil marketing companies and does not have any presence in the distribution business. Reliance Industries Ltd is the only private oil refiner in India with exposure to non-subsidised LPG business in India. Rules do not allow private companies to distribute subsidised LPG to households. Essar Oil is increasing its presence in petrol and diesel retailing by adding outlets.

Advani also said the company looks to increase the number of its fuel outlets from the current 2500 outlets to 5000 outlets in the next eighteen months time.  

The subsidised LPG business in India is currently dominated by state run companies like Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation Ltd (IOC) and Hindustan Petroleum Corporation Ltd with a combined bottling capacity of 15. 2 million tonne. The three companies together had 20.41 crore consumer enrolled  with them of which 20.18 were domestic users as of April 1, 2016. The LPG distribution market is growing. The three state run companies added more than 2 crore new customers in the last financial year.