Oil firms tighten controls on LPG suppliers

MUMBAI: Even as the government has called for more imports of cooking gas (liquefied petroleum gas) to tide over the current crisis, state-owned oil marketing companies (OMCs) Hindustan Petroleum (HPCL), Indian Oil Corporation (IOC) and Bharat Petroleum (BPCL) are monitoring their supplies.

For long, all the OMCs have seen their distributors divert supplies of LPG cylinders from the domestic to the commercial sector. The domestic sector accounts for 95% of the total 8.5 million tonne LPG sales in India.

While a 14.2-kg domestic LPG cylinder retails for around Rs 300, a 19-kg cylinder for the commercial sector costs Rs 770.

The all-India average usage for a consumer household is 120 kg, or around 10 cylinders per annum.

However, this festive season the situation is getting worse following heavy demand for LPG from domestic households, an increasing import burden due to the six-week closure of Reliance Industries’ Jamnagar plant, and rising oil prices after the Katrina and Rita disasters in the US.

And the re-routing of supplies from the subsidised domestic sector is only compounding the situation.

The OMCs are expected to cough up an additional cost of Rs 3,000 crore to import around 3.5 lakh tonnes of LPG between October and December. All this has forced the OMCs to monitor the movement of their LPG cylinders.

They have put systems in place to contain the re-routing, which, they claim, has increasingly becoming a nuisance. LPG is so commonly used even in rural India that any delays or lack of supplies are becoming a major issue.

For the past one year, HPCL has been containing diversions by conducting inspections, refill audits and frequent raids on distributors. Also, with automation at the distributor end, they have installed dedicated HP gas software packages to track supplies.

For the past one year, both IOC and BPCL have been scrutinising their supplies to distributors and the refills needed by households.

“The allocations are based on resale. We also make random checks on customers to find out if they have received their supplies,” says a BPCL official.

They then tally the customer requests and the actual supplies delivered.

How has all this impacted deliveries? Even as the OMCs claim that there is no way to quantify LPG diversions to the commercial sector, they claim that the rise in commercial purchases in the last couple of months is proof enough. 

At HPCL, in the first six months of this fiscal, the commercial sector accounted for 3% of total LPG sales, up from 1.9% in the corresponding period last year.

A senior manager at BPCL claims that commercial LPG sales at his company are up by 70% in the last few months.