While the Indian government has had its gates opened for Privatization in many sectors for years, it has also had a few under its wing like the railways, arms and ammunition and also LPG as their monopoly. But lately with the news of LPG market being considered to be opened for private companies surfacing, it has surely had us go in deep with a study on the same.
The market which is currently dominated by state owned firms like Indian oil, BPCL and HPCL that has successfully been attracting the customers by offering them gracious subsidies may soon see some cut throat competition from the private companies.
Should Competition Be Allowed in the LPG Market?
The government has also set up by a committee consisting of economist Kirit Parikh, former petroleum secretary GC Chaturvedi, former Indian OilNSE -1.14 % chairman MA Pathan, IIM Ahmedabad director Errol D’souza, and a joint secretary in the petroleum ministry which is most likely expected to submit their report by the end of July. The panel will also, “assess the need, if any, to liberalise government policies to increase the participation of private sector in LPG marketing in the country.”
A memo by the oil ministry reveals that the Terms of Reference on the marketing of the LPG set by the panel include “review the existing structure of LPG marketing in the country and assess whether competition should be allowed in the marketing of a controlled commodity which is deficient in the country.”
As LPG is a form of conventional fuel and to make it a commodity like any other common products is indeed a million dollar question what needs a much bigger thought is the market price as customers now are sold cylinders by the state-owned firms at a relatively cheaper price than the private companies.
Reliance and Others Seeking Entry Into LPG Market
Reliance Industries Limited (RIL) has been a big seller of LPG, about a million customers in several states of India, but its customer base is nothing compared to the already huge and ever-increasing population of India that has been buying the cooking gas for years now.
Reliance, along with Nayara Energy and Total had requested the Government of India to bring them into the field with Indian Oil, BPCL and HPCL. they had also asked the petroleum and natural gas ministry officials to grant them permission to sell subsidised LPG cylinders.
The annual sale of LPG cylinders is as high as 20 million tonnes and more. However, 20 million customers of India do not receive any subsidy, and this is a huge opportunity for private companies to attract customers.
