OMCs face challenges on LPG Ujjwala scheme

The identification of eligible families, as proposed in the Budget, will be in consultation with states

The central government’s announcement on providing liquefied petroleum gas (LPG) connections to 50 million households below the poverty line (BPL) in three years would mean a lot of challenge, say the three state-owned oil marketing companies (OMCs).

The scheme would provide financial support of Rs 1,600 for each LPG connection. The identification of eligible families, as proposed in the Budget for 2016-17, will be in consultation with states.

The Cabinet Committee on Economic Affairs approved the scheme — Pradhan Mantri Ujjwala Yojana — on Thursday. It has been allocated Rs 8,000 crore.

“Investments would be required on various fronts — LPG import facilities, logistics and additional bottling. OMCs will have to make additional investments to ensure we meet the targets in three years,” said the director of one.

Hindustan Petroleum Corporation (HPC), sources said, would be spending around Rs 2,000 crore in setting up an LPG import facility (Rs 500 crore) and seven to 10 more bottling units for Rs 700-1,000 crore.

“An import facility is required at the east coast. If the infrastructure is well placed, the investment required could be less,” said an official. HPC, sources said, is looking for land to build a new LPG bottling plant of 60 million tonnes (mt) per annum. Bharat Petroleum Corporation (BPC) plans to build an LPG import terminal at West Bengal’s Haldia, for Rs 800 crore. The company has acquired 35 acres for the purpose and plans to complete the project in three years.

“We have infrastructure in the western and southern regions but there is a problem in the eastern region. The next market for us is Bihar, the Northeast, Jharkhand, eastern UP and West Bengal. So, our import terminal will come up at Haldia,” said a BPC official.

The capacity of the planned terminal would be two 15,000-tonne tanks, capable of handling VLCC (very large crude carrier) vessels. “We will be looking at an expansion later,” the official added. The company expects cooking gas demand to grow six to seven per cent this financial year, with lower prices and increasing focus on rural reach. Indian Oil Corporation, the nation’s largest OMC, is constructing an LPG import facility of 600,000 tonnes per annum at Paradip, Odisha, for Rs 690 crore.

In January 2015, it had decided to invest Rs 5,300 crore for this and to lay pipelines. In 2014-15, the country imported 8.33 mt of LPG, while total consumption was 18.2 mt. In 2013-14, imports were 6.61 mt and total demand 16.29 mt.

OMC officials said they need clarity on the capacity of the LPG cylinders the government plans to allot to rural areas.  

“The consumption pattern of rural households is different. They use four to five LPG cylinders a year, while urban households use nine to 12 or more,” said a BPC official.

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