Lpg Mncs Threaten To Exit, Seek Subsidies

Multinational LPG (liquefied petroleum gas) marketing companies, after suffering eight years of losses due to the absence of state subsidies, have now threatened to pack their bags and leave India unless subsidies to public sector oil companies are extended to them as well.

At least one of the MNCs, Royal Dutch/Shell -- which has a joint venture company in LPG with Bharat Petroleum (BPCL), Bharat Shell -- has said its investments earmarked for India are getting diverted to alternate destinations like China as a result.

Having already invested over Rs 900 crore in the country, the MNC LPG marketeers have frozen all further investments in the country.

Apart from Bharat Shell, Caltex SPIC India, Elf Gas India, Hindustan Aegis LPG Bottling Co, Mobil Peeves and SHV Energy India are the five other MNCs which are part of the Indian Liquefied Petroleum Gas Industry Association (ILPGIA).

The association has been demanding a level-playing field in LPG marketing for years now, or at least lowering of subsidies to state undertakings to 15 per cent (from 40 per cent now) as has been the government's stated policy.

Senior petroleum ministry officials, however, have said the subsidies to oil PSUs will not be extended to private players.

S Radhakrishnan, managing director of Bharat Shell, said, "In spite of our presence in India since 1993, we are only getting negative returns on our investments. The losses from our LPG marketing operations are eating into the profits from the lubricants' business, where there is a level-playing field."

"Hence, we are diverting investments meant for India to other destinations as a result," he added.

S K Hazra, managing director of Hindustan Aegis LPG Bottling Co said, "There is no level playing field for the private sector in the domestic cylinder market, which constitutes 90 per cent of the country's LPG consumption. The current level of subsidies awarded to public sector companies, of Rs 140-165 per cylinder, is against the government's stated policy of 15 per cent residual subsidy."

The silver lining for the private sector, however, is the recent statement by Ram Naik, the Union minister for petroleum and natural gas, assuring that the deregulation of the petroleum sector will be achieved by end of March, 2002, Radhakrishnan added.

The government, as part of its roadmap for disinvestment, had proposed to bring down subsidies on LPG to 15 per cent by March 31, 2001.

However, the government has not been able to reduce the subsidies on LPG from the current level of 40 per cent, due to socio-political compulsions.