Capping subsidised cylinders sees flat LPG demand in Sept

This September has seen an unusually flat demand for LPG cylinders. It had grown 5% in the previous month but a cap on sale of subsidized domestic cylinders last month has seen LPG not recording any increase in demand last month.

Besides, oil marketing companies have been clamping down on diversion. “Sale growth of LPG used to be 5-6% before the government imposed a subsidy cap. It has now fallen to near negligible. Such a flat demand growth has not been seen in recent history. Diversion is getting checked both at the dealer and at the consumer level,” said M Nene, director (Marketing) at IndianOil.

 

According to Petroleum Planning and Analysis Cell (PPAC) of the petroleum ministry, LPG consumption growth stood at 5% in August this year. Consumption grew 7.2% in the last fiscal and 9.1% in FY11. The drop in demand is a good sign as the country meets part of its requirement from imported LPG.

According to a Central decision on September 13, a consumer can get maximum six subsidised cylinders, priced currently at Rs 410 in the capital and will have to shell around Rs 894 for every cylinder for additional quantities. For the period between September 13, 2012 and March 31, 2013, all consumers are eligible for three subsidised cylinders but have to pay market price for fourth onwards. Beginning April 1, every fiscal a consumer can buy up to six cylinders at subidised rates but have to pay market price for additional quantity.

When the decision to cap LPG subsidy was taken last month, the market price of domestic LPG was Rs 756 per cylinder in the capital while the subsidized price was Rs 399. With the monthly price revision in October in line with international prices, the market price of domestic LPG jumped to Rs 894. A marginal increase was also on account of an increase in delaer’s commission. The subsidized LPG price rose to Rs 410.