promoting LPG Penetration in rural India : Examining Affordability & Accessibility

2016
Ramana Sambu
Great Lakes Institute of Management
PromotingLPG Penetration in Rural India:ExaminingAffordability& Accessibility

1 | Promoting LPG Penetration in Rural India: Examining Affordability & Accessibility
Contents
1. Introduction................................................................................................................................2
1.1. Objective of Study................................................................................................................4
1.2. Components Of Study..........................................................................................................6
1.3. Methodology.......................................................................................................................6
2. India’s Energy Demand................................................................................................................6
2.1. Energy Trends in India..........................................................................................................6
2.2. Trend of Primary Energy Consumption................................................................................10
3. LPG: Cookingfuels ........................................................................................................................11
3.1. Global LPG Production and Consumption............................................................................11
3.2. Status of LPG in India.........................................................................................................12
3.3. LPG Subsidy: Indian Context ...............................................................................................14
3.4. LPG Reforms in India..........................................................................................................19
3.4.1. Improvementin LPG distribution.................................................................................19
3.4.2. Subsidy Leakage in LPG...............................................................................................20
3.4.3. Transparency Portal....................................................................................................22
3.4.4. Mobile Application .....................................................................................................23
3.4.5. Refill Booking through SMS/IVRS.................................................................................23
4. LPG Demand.............................................................................................................................24
4.1. LPG Supply ........................................................................................................................28
4.2. Current availability of LPG in India......................................................................................29
4.3. LPG Supply Mix..................................................................................................................30
4.4. Production of LPG from refineries (During the period 2014-15) ............................................31
4.5. Rural and Urban Distribution of LPG....................................................................................34
4.6. Ports& Import Terminals....................................................................................................35
4.7. LPG bottling plants.............................................................................................................41
5. LPG – Access & Affordability ......................................................................................................42
6. Barriers.....................................................................................................................................48
7. Suggested approach..................................................................................................................48
8. Further Recommendations: .......................................................................................................51
9. Appendix ..................................................................................................................................52
10. References.................................................................................................................................60

1. Introduction
In this fast changing era of technology adoption and inclinationtowards sustainability it is surprisingto
know that 2 billion people in the world still rely on biomass energy mainly on wood, dung and crop
residues.Itisreportedthat some 840 millionare estimatedtolive inIndiaalone(WEO,2015). According
to the Census of India, 2011, about 91% of rural and 31% of urban5 homes depend chiefly on traditional
fuels-- fuel-wood,animaland crop wasteandcharcoal-- forcooking.The practical challengetothe needy
here isthat he exhaustshimself travellingafarthe fieldandspendsalot of time for thisdiminishingfuel-
woodsourcesbuyinghimselfaseriousthreatof exposuretodangerouslyconcentratedparticulate matter
resultingfromincompletecombustionof domesticfuels.While individuals(mainlywomenandgirls) are
exposed to the injurious effects (of smoke inhalation, the emission of unburned hydrocarbons through
traditional stoves,andsoot depositswhenwashedoff vessels,etc.) andalsohave to spendtime on fuel
gathering, the community as a whole is adversely affected both by the ambient pollution created by
simultaneous cook-fires and through land degradation in cases where fuel-wood is gathered in an
unsustainable manner.
Figure 1: Energy Ladder; LPG is at the top of energy ladder for Rural and Semi-rural areas
Source:AnalysisbasedonWLPGA
While Agenda21whichisacomprehensiveplanof actionof the UN DivisionforSustainable Development
specifically recognized the challenge of providing access for rural householdsto modern energy sources
and calledfor“a rural energytransformation”,effortshave focusedchieflyonelectricitygeneration.This
hasmeantthat the needforcleanerandmore efficientcookingfuelshasnotbeenadequatelyaddressed.
Trends in householdfuel use can also be viewed alongan “energy ladder”, from simple biomass fuels--
twigs/shrubs,dung, crop waste -- at the lowest levels, to fuel-wood, charcoal, and kerosene, and finally
to LPG andelectricity.The fuel-stove combinationsbecome cleanerandmore efficient,butalsoincrease
Cow Dung, Crop
Residues,Wood
Wood,Charcoal,Kerosene
LPG,Electricity
AffluenceLevel
3 C’s:Comfort,
Cleanliness,Convenience
Rural Areas
Semi Urban Areas
Urban Areas

in capital costs as the ladderis ascended(OTA,1992). Therefore,ashouseholdincome increases,people
are able tomove upthe energyladder,affordingseeminglymore expensive butmore efficientsourcesof
energy, if they are accessible. Unfortunately, while householdsaround the world have moved to higher
qualityrungsof the ladder,indevelopingcountriesmanyare still dependentonfuel-woodorhave been
forceddownbylocal woodshortage tocrop residuesorevenshrubsandgrasses.Itthereforeispertinent
to assess the current use of various domestic cooking fuelsand the possibility of shifting to cleaner and
more efficient options. One of these options is liquefied petroleum gas (LPG).
Increasinghouseholduse of liquefiedpetroleumgas(LPG) isone of several pathwaystomeetthe goal of
universal access to clean cooking and heating solutions by 2030, as stated in the United Nations’
Sustainable Energy for All Initiative. There is a need to examine factors affecting householduse of LPG,
the state of LPG marketsin a developing countrylike India,andmeasurestoenable more householdsto
shift away from solid fuels to LPG. The three separate but complementary analyses of factors affecting
LPG use in the country need to be assessed:
 Econometric analysis of national household expenditure surveys that assesses the factors
influencing LPG selection and consumption;
 Examination of LPG markets including the regulatory frameworks, pricing and other policies,
supply infrastructure, cylinder management,amount of information available to the public, and
activities designed to promote household use of LPG; and
 Data fromhouseholdsaboutenergychoicesrelatedtocooking,withinformationonenergychoice
by wealth quintile.
At today’sworldLPG prices,regularusersof LPG wouldlikelyneedmonthlyhouseholdincome inexcess
of US$350, thus making it unaffordable for the poor in most cases. However, many other households
capable of paying for LPG continue to use solid biomass as their primary cooking fuel. They could
potentially switch to LPG without financial assistance under suitable market conditions. Interestingly,
everything else beingequal,the higher the education levels attained by household members,the more
likelythe householdwastoselectLPG. Thiseffectwaslargerfor women than men.Once educationlevels
of womenandmen were separatelyaccountedfor,ahouseholdheadedbya womanwas no more likely
to favor LPG selectionandconsumptionthana male-headedhousehold,perhapsbecause male- headed
households tend to have more assets and access to credit and employment. Educating the public,
especially women, about the costs and benefits of fuel choice could promote a switch to cleaner fuels.
Such awareness-raising and public education, however, is lacking in many developing countries. Both
governments and LPG marketing companies can do much more on this score using the internet,
newspapers, TV, and other media, as well as face-to-face demonstrations by retailers.

1.1. Objective of Study
Promoting LPGPenetration in India:Examining Affordability and Accessibility by figuring outthe focusfor
future plans with respect to policies, reforms and strategies to widen the LPG market in India
Why LPG?
The propertiesof LPG, especiallyitsportability,hotflame,low emissions,low carbonfootprintand high
energyvalue,makesitan outstandingchoice forcooking.Asa result, nearlyhalf the world’sdemandfor
LPG is in the residential sector for cooking, hot water and space heating
Given the extensive use of firewood for cooking in India, studies have been made on emissions from
biomass-based stoves, including a detailed study of greenhouse gases from small-scale combustion
devicesindevelopingcountries–withspecial referencetohouseholdstoves(Smithetal.,2000a,b).Table
1 showsthe indoorconcentrationof healthdamagingpollutantsfromatypical wood-firedcookingstove
while Table 2 indicates the default emission levels for carbon monoxide (CO), methane (CH4), non-
methane organic compounds and nitrous oxide (N2O), through various residential fuel options
Table 1: Indoor concentration of health-damaging pollutants from a typical wood-fired cooking stove
1 kg of wood per hour in 15ACH 40m3 kitchen
Carbon
monoxide
150
mg/m3
(10
mg/m3 )
Particles
3.3mg/m3 (0.1
mg/m3 )
Benzene
0.8 mg/m3
(0.002 mg/m3
)
1,3-Butadiene
0.15mg/m3(0.0003mg/m3))
Formaldehyde
0.7 mg/m3(0.1 mg/m3)
The numbersin parenthesesindicatetypical standards set to protect health. (Source: Smith et al., 2000b
Table 2: IPCC default (uncontrolled) emission factors for residential fuel combustion (g/kg)
CO CH4 TNMOC* NO2
Gas 2.0 0.2 0.2 0.005
Oil 0.9 0.4 .02 0.03
Wood 80.0 5.0 9.0 0.06
Charcoal 200.0 6.0 3.0 0.03
Dung/Agricultural wastes 68.0 4.0 8.0 0.05
Source: IPCC

There have been studies correlating fuel use and personal activity patterns with health concerns, based
onthe use of biomass,andtypesof stoves,andinparticular,forspecificpartsof the country.Forexample,
a sample study of 58,768 individuals in 10,265 rural households in 118 villages from 18 districts in the
North-Indian states of Uttar Pradesh, Himachal Pradesh and Rajasthan (Parikh, et al., 2003) found
correlationbetweenthe incidenceof respiratoryailmentsandthe use of biomass-basedfuels;the effects
of health damaging pollutants through the present cooking fuels was established, although this was
exacerbated by factors such as kitchen location and limited ventilation.
Among “cleaner” fuels, biogas, kerosene and LPG, the first depends on the availability of cattle, and
betweenthelattertwo,LPGhasbeenfoundfromcomplete life-cycleenvironmentalassessments(burden
associatedwiththe entire product/package) tobe apreferable option.A comparisonwasmade between
kerosene andLPG (Jungbluth,1995) in termsof the entire product/package,i.e.onthe basisof the total
life-cycle impact from the extraction of crude oil and natural gas, to processing in refineries and
fractionating plants, product transport and distribution, and finally cooking. For a majority of the
indicators, it was concluded that LPG had an ecological advantage over kerosene. For the purpose of
comparingthe total costs of each alternative,we have made a cost benefitanalysisof differentfuels(in
Indian Rupees) considering prices at Delhi for all the fuels as a base. It is important to note that the
constituentsof total life-cycle costvary,withfuel comprisingamuchhigherproportioninthe case of the
lessefficientoptionslikefuel woodandconverselythe stove(capital)costcontributingmuchmore tothe
higher-efficiencyoptionslikeLPG.Therefore,alargerinvestmentmadeinthepresentforacquiringamore
efficient carrier system is compensated for by the long-term saving in fuel costs
LPG can therefore be recommended both for its higher efficiency and lower environmental impact than
the alternatives. The human labor avoided and time saving achieved through convenient cooking fuels
have not been imputed with a value, but need to be considered too. There are other alternatives to
traditional cookingfuels.Renewablesourceswouldobviouslybe preferable,aslongastheywere usedin
a sustainable14manner.Inparticular,biogas(throughanimal dungand/orfibrouscropresidues) hasbeen
found to be the most efficient among the currently available “clean” cooking fuels (Smith,et al., 2000).
But the use of biogasis restrictedbythe availabilityof cattle.New renewable optionsnotyetin use the
country, such as di-methyl ether (DME), methanol, and synthetic LPG (syn-LPG) have also to be
considered.
Since LPG is a petroleum-based fuel, it can be argued that increased use of this fuel should not be
advocated;local sourcesofpetroleum-basedproductsare limited,andinternational sourcesare adversely
affected by political problems and price volatility. On the contrary, it should also be considered that
people indevelopingcountries,particularlyinthe lowerincome categoriesshouldbe allowedthe choice
of such a fuel, because their contribution to greenhouse gas (GHG) emissions has been miniscule and
constraints should therefore not be imposed on them in the name of climate change. A poor person in
Indiais saidto emitonly50 to 60 kg of carbon, comparedto the worldaverage of 1,100 kg and 5,000 kg
in the USA (Parikh and Denton, 2002)

“Therefore the switch to LPG is a transitional step or a complimentto biomassbasedfuels andseen as
a short term or a medium term option”
1.2. ComponentsOf Study
The components of study include various aspects right from assessing economic growth of the country
with the help of different macroeconomic indicators which explains the growing environment of the
country to the study of socio-economiccaste censusSECC report for understanding differentfactorsthat
were very vital forthe outcome.These factorsinclude No of householdsin differentstates,percentageof
householdsfalling in differentincomeslab,ruraland urban inflation in differentstates,percapita income,
gender wise literacy rate along with state-wise per capita state domestic product, LPG customers, LPG
distributors,bottling plantsand theircapacity,road density.A study of differentpoliciesand reformswith
their implicationswasalso carried outto help analyzetheneed-gapswith existing situation.Allthishelped
in deciding the focusof the study thatthere needs to be a strategic approach in particular regionswhere
thereis a lackin infrastructuredevelopmentorawarenessand education.Thestudy also answerswhyLPG
addresses the needs of a woman and hence the target point in increasing its access should be women
acrossdifferentsegmentwithcustomized approach.Analyticaltoolswereused in drawing clearpictureas
to where marketers and the authorities should invest their time.
1.3.Methodology
This is a desktop study. Information has been gathered from various published material with proven
credentials and authenticity along with primary and secondary research. A survey was conducted to
collect data for ***
2. India’s Energy Demand
2.1. Energy Trends in India
Indiaisinthe midstof aprofoundtransformationthatismovingthecountrytocenterstage inmanyareas
of global interaction.A vibrant democracy that is home to over one-sixth of the world’s population and
its third-largest economy, India’s modernization has been gathering speed and new policies have been
introduced to unleash further growth.
The opportunities are huge, but so is the size of the remaining challenges: although incomes and
correspondingstandardsof livingare onthe rise,Indiaisstill home toathirdof the world’spoorandgross
domesticproduct(GDP) percapitaiswell below theinternationalaverage.India’senergysectorhasgrown
tremendously in recentyears. Further economic and population growth,alliedto structural trends such

as urbanization and the nature of the envisioned industrialization, point unmistakably to a trend of
continued rapid expansion in demand for energy. Recognizing this challenge, Indian policy-makers are
makingstrenuouseffortsto remove obstaclestoinvestmentinenergysupply,while movingaheadwith
complementarypoliciesonefficiencyandenergypricingthat can constrain growthin consumption.The
analysisandfindingsinthisspecialfocusonIndiadisclosethese multiple pressuresandshow how policies
can affectthe evolutionof the Indianenergysectorsoastorealize thehuge benefitsthatawell-managed
expansionof energyprovisionwill bring.NoeffortismadeheretoprescribeapathforIndia;ourintention
is,rather,to provide acoherentframeworktocontribute tothe policychoicesthatIndiaitself will make,
drawing out the possible implications of these choices for India’s development, energy security and
environment, as well as for the global energy system.
Indiahasbeenresponsibleforalmost10% of the increase inglobal energydemandsince2000. Itsenergy
demand in this period has almost doubled, pushing the country’s share in global demand up to 5.7% in
2013 from4.4% at the beginningof thecentury.While impressive,thisproportionisstillwellbelowIndia’s
near 18% current share of global population, a strong indicator of the potential for further growth.
Expressedonaper-capitabasis,energydemandinIndiahasgrownbyamore modest46% since 2000 and
remains only around one-third of the world average, slightly lower than the average for the African
continent. One reason is that a significant part of the Indian population remains without modern and
reliable energy: despite a rapid extension of the reach of the power systemin recent years,around 240
million people in India lack access to electricity.
Graph 1: Per Capita Energy Consumption: India and Select Economies.
Source: Analysis Based on IEA Report
Figure 2: Geographical Representationof average Per Capita Energy Consumption (World)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2001200220032004200520062007200820092010201120122013
BRAZIL
RUSSIA
INDIA
CHINA
SOUTH AFRICA

Source: Analysis based on Data from IEA and World bank
The widespreaddifferencesbetweenregionsandstateswithinIndianecessitate lookingbeyondnational
figurestofullyunderstandthe country’senergydynamics.Thisistrue of all countries,butitisparticularly
important in India, both because of its size and heterogeneity,in terms of demographics, income levels
and resource endowments, and also because of a federal structure that leaves many important
responsibilities for energy with individual states. For example, figures for residential electricity
consumptionpercapita (forthose withaccess to electricity) show abroad range betweenthe area with
the highestlevels,inDelhi –the onlypartof Indiawithconsumptionhigherthanthe nonOECDaverage –
andotherstates(Figure1.2).Residentialelectricityconsumption(forthose withaccess)remainsfarbelow
the worldaverage and is ten-timeslowerthanOECD levels.Average residential consumptioninBihar,at
around50 kilowatt-hours(kWh) percapitaperyear,isconsistentwithanaverage householduse of afan,
a mobile telephone and two compact fluorescent light bulbs for less than five hours per day. Energy
demand has almost doubled since 2000, but this is slower than the rate of economic growth over the
same period (Figure 1.3). This is due in part to the shift away from bioenergy3 consumption in the
residentialsector,the risingimportance of the servicessectorinthe Indianeconomyandincreasedpolicy
effortsdirectedatend-use energyefficiency.Asaresult,ittook12% lessenergytocreate aunitof Indian
GDP (calculated on the basis of purchasing power parity [PPP]) in 2013 than was required in 1990. The
amountof energyrequiredtogenerate aunit of GDP (PPPbasis) inIndiais slightlylowerthanthe global
average. Even so, much energy is lost or used inefficiently, notably in the power sector because of the
generationtechnologiesused,the poorstate of the transmissionanddistributioninfrastructure andthe
relativelylowefficiencyof end-use equipment.Significantuntappedenergyefficiencypotential remains
across the entire energy system, which could help temper the further growth in energy consumption.

Graph 2: Primary Energy Consumption: 2014-2015
Source: BP Statistical reviewJune 2015
 China replaced USA in 2010 as the largest energy consumer and will keep this slot up to 2040
 India is 4th largest energy consumer in the world and will become 3rd
largest by 2030
 USA replacedSaudi ArabiaandRussiain2014 as the largestproducerof oil andO&Grespectivelydue
to shale revolution in USA
Figure 3: Indian Energy Basket
Source: BP Statistical review June
2015
 India consumes 4.9% of total
world energy even though its
population is 18% of the world
 Natural Gas consumption is
increasing as a replacement of oil
& coal in the world.
2972
2298
682 637 456 333 311 296 273 237
0
1000
2000
3000
4000
TOTAL WORLD: 12928 MTOE
Oil
28%
(180.7)
Gas
7%
(45.6)
Coal
57%
(360.2)
Nuclear
1% (7.8)
Hydro
5%
(29.6)
Renewa
bles
2%
(13.9)
Indian Energy Basket: 637
MTOE

Figure 4: World Energy Basket
Source: BP Statistical review June 2015
2.2. Trend of Primary Energy Consumption
 Growth rate of energy consumption in China @ 8.9%, India @ 8.4% and Asia Pacific @ 5.6% was
largest in the world in last 10 years
 Almost stagnant energy consumption in rest of the world
Graph 3: Trend of Primary Energy Consumption Across Different Economies
Source: BP Statistical review June 2015

3. LPG: Cooking fuels
LPG is a clean energysolution,whichemits60% lessCO2 emissionsthancoal and 20% lessthan furnace
oil,makingitideal foruseinheatingandcookingapplications.LPGalsoimprovesbothindoorandoutdoor
air quality by substantially reducing pollutants such as SOx, NOx and particulate matter which are
hazardous to health.
#Cookingfor life,launchedin2012 underthe Exceptional Energybrand,isamajorWLPGA campaignthat
aimsto convertone billionpeople fromcookingwithtraditional fuelsforcooking with LPG by 2030. LPG
is used as a cooking fuel across the globe. Switching from solid fuels to LPG can dramatically improve
indoorairqualityandpotentiallysave millionsof lives.Argusandthe WorldLPGAssociationhave recently
launchedthe annual Statistical Reviewof Global LPG,whichcontainsglobal productionandconsumption
figures across the different regions. (Published in May 2015)
3.1. Global LPG Production and Consumption
Global LPG production rose by 4.1% to over 284mn t/yr. in 2014. The principal rise came from the US,
where output surged to a massive 68.2mm t/yr., 13.4% higher than in 2013.US production alone was
largerthanoutputfromanyregion,includingthe MiddleEastasawhole.Sincethestartof NorthAmerican
shale gasdevelopmentin2009, US productionhasaddeda further20mn t/yr.of LPG production — none
of which was predicted a decade ago.
Graph 4: Global LPG Production in Mn Tonnes / Year
Source: WLPGA LPG production (mnt/year)
Global LPG consumption rose by a robust 4pc in in 2014 to more than a 275mn t / yr. There were many
strong results across the world, but the focus in 2014 stayed on Asia-Pacific and India in particular.

Indonesian demand should peak over the next few years, but its extensive kerosene-to-LPG fuel switch
has created a 6mn t/yr. market in just five years.
India’s demand potential remains relatively undeveloped. But consumption rose to over 18mn t/yr. in
2014, a 10.3% rise compared to 2013.
The domesticmarketsector,whenitiswell-supportedbygovernmentandindustry,canunderpinregional
consumption.Asia-Pacificdemandfromthe domestic sector reached 57.6mm t/yr. in 2014 — by far the
largest regional total in the world. Three countries still dominate this sector: China, India and Japan.
Graph 5: Global LPG Consumption in Mn Tonnes/ Year
Source: WLPGA LPG Consumption (MNT/Year)
Indiainthe 21st
centurystill fulfillsitscookingenergydemandfromfirewood,cropresiduesandcowdung
cake.Unlike the developedcountries,suchasUSA,China,Japan,Germanyand otheruse cleanercooking
fuels.
These resourcesprimarilyavailable innearbylocationwithnoextra cost in rural area,hence considered
to be one of the important factor that explains the high usage rate in rural area. The “no-cost” or free
factor overrideshealthhazardswhichresultsinsmoke pollutionandotherconsiderations.Inadditionto
this,anotherfactor that can be consideredforrural home as comparedto urban householdsstill in2016
holds, i.e. scarcity of a closed kitchen which further encourages usage of traditional cooking fuels.
3.2. Status of LPG in India

In FY 2014-15, total LPG consumptiongrew byover10% relative toFY 2013-14, whichshowsan increase
on the previous year’s growth rate backed by the infrastructural reforms led by the Government.
Graph 6: Annual LPG Consumption (MoPNG data)
In India, according to the MoPNG LPG consumption has been categorized into Domestic (Subsidized),
Domestic (UN-Subsidized), transport, Industrial/Commercial and Bulk LPG. Within the total LPG
consumption, over the decade, domestic consumption is predominant by 85%.
Governmentof India (GoI) has allowedthe sale of LPG to Indianhouseholdsectorby private companies
(parallel marketers), although their market share is negligible as compared to the Government oil
marketing companies i.e. Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum
Corporation. This is because GoI provides subsidies to every customer registered with these OMC’s.
OMC’s servedthe large customerbase via 15,930 distributorswhichare spreadacross the country,both
inRural and urban areas and followstwotypesof distributionmodel. Regulardistributorsare appointed
to sell LPGconnectioninbothurbanandsemi-urbanareas.Till May2015, toincrease the LPGpenetration
in India distributors were appointed under the Rajiv Gandhi Gramin LPG Vitran Yojna
(RGGLVY).Withthese efforts bythe governmentof India, LPGcoverage hasbeenincreasedsubstantially.
Till Oct 2015, total numbers of LPG connections in India are 18.19 Crores.
0%
2%
4%
6%
8%
10%
12%
14%
16%
9000
10000
11000
12000
13000
14000
15000
16000
17000
18000
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
(P)
Annual LPG Consumption
Growth Rate (%) 000 metric tonnes

Graph 7: Cooking fuel Usage for Rural and Urban HH
AccordingtoCensusdata2011, the rural populationwas69% of the total populationascomparedto73%
in 2001. For the firsttime since independence,there isanabsolute increase inthe urbanizationi.e.from
28% inthe 2001 censusto31%. Indiashowsa significantcontrastingchoice of usage of differentcooking
fuels in rural and urban areas.
As most of the population belongs to rural area, 82% rural home in India continue to use traditional
cookingfuels.AccordingtoNSSO2011 (68th
Round),68% householdsare stilldependentonthe firewood,
crop residues and only 12% uses LPG as a cooking fuel.
* Above data is based on the NSSO information collected through Sch. 1.0, Consumer Expenditure, Type 2 during 2011-12 from
101651 households (59683 rural and 41968 urban) in 7469 villages and 5268 urban blocks spread over the entire country.
3.3. LPG Subsidy: Indian Context
The Governmentof India,sincethe independence,subsidizedmanyindustriesandtheirproducts,starting
fromfuelstofood.Underthese initiatives,subsidiesare beingofferedinthree maincategories,i.e.food,
fertilizersandfuels.Underthe fuel category,subsidiesare beingrestrictedtoonly LPG and kerosene.In
2014, the Governmenthadrevokeddiesel subsidyandkeptthe commodityforsaleonmarketdetermined
price.
The gross subsidy, on account of LPG, arises from the retail prices of domestic/household LPG which is
beingsoldbelowthe price ascomparedtothatof non-domesticLPG.Unlike the subsidyonkerosene,the
subsidyonaccount of LPGisavailabletoall personswhohaveahouseholdLPGconnectionwiththepublic
sector companies.
Retail prices ofdomesticLPG has beensubsidizedbytwomechanisms:Direct SubsidyandOil Marketing
company under-recoveries.

Directsubsidiesare allocatedbyGovernmentformtheirbudgetaryexpenditure andithasto be uniform.
In 2016, direct subsidy is provided on 14.2 Kg cylinder which accounts for INR 22.58 per unit (cylinder).
Thisflat-rate hasbeenkeptconstantsince2004-2005. In2013-14, directsubsidiesaccountedtoINR1904
crore compared to INR 1989 crore last year.
Graph 8: Year on Year Total Direct Subsidy and growth Percentage
In addition to the direct subsidies,the Government also controls the price of LPG and distribution with
the equity they owned in PSU’s, which are further managed by MoPNG. The Government controls the
prices at which OMCs can sell petroleum products which leads to under-recovery i.e. the difference
between the costprice incurredbyoil marketingcompaniesandthe prize atwhichLPGisavailable to the
final customer. LPG consumptionhas grownmuch fasteras compared witheitherpetrol or diesel inthe
last decade. In addition to this, the variability in international prices and growing exchange rates would
have considered as variable factors that added to the amount of subsidy.
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
0
500
1000
1500
2000
2500
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Total DirectSubsidy
Growth of Direct Subsidy Direct Subsidy (in crore)
Year
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
2013-
14
DirectSubsidy(in
crore)
1605 1554 1663
1714 1814 1974 2137 1989 1904
Rs (inbn) 16.05 15.54 16.63 17.14 18.14 19.74 21.37 19.89 19.04
Growth (%) 0% -3% 7% 3% 6% 9% 8% -7% -4%

Drivenbyweakeningof INRandconsistentlystronginternationalcrude price startingfrom FY 2009-10 to
FY 2013-14, underrecoveriesgrewatan average of 34%. Since June 2014, underrecoverieshave shown
a negative trend as crude oil prices have fallen sharply.
Graph 9: Year on Year Total Under Recoveries and its growth in India
Table 4: Growth of total under recoveries from 2005-06 to 2014-15
Year
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
2013-
14
2014-
15
INR
(Crore)
10246 10701 15523 17600 14257 21772 29997 39558 46458 36580
Rs (Inbn) 102 107 155 176 143 218 300 396 465 366
Growth
(%)
0%
4.4% 45.1% 13.4%
-
19.0% 52.7% 37.8% 31.9% 17.4%
-
21.3%
Source: PPAC data (2015)
Based on the PPAC consumption data of LPG, benefitsof the current LPG subsidy scheme have been
disproportionate across different states and within those states basically urban areas are benefited
(MoPNG and CEEW data analysis 2014).
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
Total Under- Recoveries
Growth (%) INR (Crore)

Graph 10: State-wise Share in Subsidy
Source- AnalysisofPPACstate wise consumptionofLPG andnumber ofdomestic connectionseach
state has.
6%
4%
3%
4%
3%
6%
5%
4%
12%
4%
5%
9%
5%
12%
6%
0% 2% 4% 6% 8% 10% 12% 14%
ANDHRA PRADESH
BIHAR
DELHI
GUJARAT
HARYANA
KARNATAKA
KERALA
MADHYA PRADESH
MAHARASHTRA
PUNJAB
RAJASTHAN
TAMILNADU
TELANGANA
UTTAR PRADESH
WEST BENGAL
% Share in Subsidy

*Estimated per capita
expenditure.
Assumptions have been
made while doing
above analysis.
Considered state wise
population data and
extrapolated the data
linearly with 1.3% of
population growth rate
(Index Mundi, world
bank). Assumed
uniform ratio of
subsidized to
unsubsidized
consumption of LPG.
** Some of the other
states and union
territories have higher
per capita expenditure
compared to Delhi.
Graph 11: Per capita
expenditure onLPG
subsidyby state 2014-15
The subsidymechanism,evenbydesignisnotrestrictedtothe poororthe lowerincomestrataof society.
More important to the design, is the problem that the amount of subsidy is essentially openended. As
the numberof connectionsincrease withurbanization,effectivemeasuresbythe Governmenttoincrease

the usage of clean fuel and per capita consumption increase with income, the total subsidy can only
increase.
In the most recent fiscal, total subsidized consumption by volume, subsidized household consumption
and subsidized consumption as a percentage of overall consumption all increased sharply. Data from
Ministry of Petroleum and Natural Gas (MoPNG) indicates that in FY 2014-15:
Table 5: Type of consumption of subsidized/ Un-subsidized
Type of Consumption Increase/Decrease Equivalentmetrictons
SubsidizedConsumption Increasedby18% 2357200
Un-subsidized Consumption Decreasedby19% 667400
3.4. LPG Reforms in India
3.4.1. Improvement in LPG distribution
RGGLVY
Following vision 2015 and to spread LPG distribution network in rural and under covered areas, GoI
launched “Rajiv Gandhi Gramin LPG Vitran Yojna” on 15th
October 2009. According to the recent IOC
annual report,OMC’s has establishedapproximately4800 distributorsacrossthe country and out which
approximately2200 distributorshave beensetup by the IOC.LPG distributorsrequire certainminimum
infrastructure and operating criteria to viably operate in a particular locality. In rural areas (town &
villages), where populationin a particular area is low, normal distributorshipis not viable. Hence, the
dealersunderRGGLVY are distinguishedextensivelyon the premise of potential average monthlysale of
600 refillsand1,200customers.The godownandshowroomare foundnearoneanotherwiththegodown
having an ability to store around 300 barrels. These dealers don’t deliver cylinders at their doorstep,
however, LPG refills have been sold at prescribed retail prices.
In addition to RGGLVY in 2014, GoI included BPL scheme under CSR fund where a customer security
deposit and pressure regulator has been paid (approximate amount is 1600/- Rs) via corpus created by
companies like ONGC, OIL, GAIL, IOCL, BPCL and HPCL.
Recently on 5th
August 2015, GoI led by Narendra Modi discontinued this scheme. One of the press
statements that has been released by top official of OMC is as follows:

“The rural LPG selections, under RGGLV, have been kept on hold by the petroleum ministry as it is
contemplating some changes in the guidelines for the selection of dealers.”
3.4.2. Subsidy Leakage in LPG
Quota Allocation
On September12th
2012, Governmentannouncedaquotacap on numberof subsidizedcylinderthathas
to be allocatedtoanindividualcustomer.Thiseffortwasputforwardedwithanintentiontostopsubsidy
leakage andto checkincremental expenditure associatedwithit.Initially,underthisreformGovernment
kept 6 subsidized cylinders that can be provided to an individual customer.
Though on January 16th
2013, with sustained political pressure,Government increased the quota to 9
subsidized cylinder. With this reform, UPA Government faced sustained political pressures. Later, on
January 2nd
2014, Government raised the quota from 9 to 12 subsidized cylinder annually.
Initiallywiththe launchof thisreform,overall LPGconsumptionimpacted.Below dataanalysisshowsLPG
consumption between September 2012 and February 2014.
Graph 12: Impact Quota Allocation
Monthly Consumption of LPG (September 2012- March 2014)
Withthe quotacappinginSeptember2012,consumptionof LPGregisteredfourmonth’snegative growth
rate. The small year-on-year increase in growth in March 2013 was primarily due to quota revisiongain

i.e. from 6 to 9 subsidizedconnections. During FY 12-13, overall LPG demand was very low due to slow
downof economicgrowth.InJune2013,DBTL waslaunched,butithadnosignificantimpactonaggregate
LPG consumption except on the local level in pilot districts.
De-duplication to eliminate duplicate LPG Connection
The petroleum and natural gas ministry has launched “Project Lakshya” with assistance of National
Informatics center and Centre for Development of Advanced Computing (C-DAC) in year 2010 to check
and eliminate duplicate or ghost LPG connections with an end motive of to curtail down subsidy
expenditure.
Underthisscheme,like inIndianbankingsectorwhereKnowYourcustomerhasbeeninitiated,everynew
customerhastoprovide theirproofof addressandidentitytoseekanew connectioninastandardformat
across all publicsectorcompaniesi.e.IOCL,BPCLandHPCL. During thisphase entire registrationprocess
has beenre-engineeredwhichtherefore resultsincapturingrightdetailsof the customers.Accordingto
Ministry’s Statement in the leading newspaper The Hindu:
“The OMCs have till date blocked nearly 8 million inactive connections, which were potentially being
misused. They have traced 1.3 million same-address, same-name connections which have been since
blocked;25.3 million suspected connectionswith sameaddresshavebeen detected;4million of themhave
been blocked so farand verification forthe restis in progress.A totalof 13.3 million LPG connectionshave
been blocked so far.”
Till 1st
March 2015, Oil marketingcompanieshaveblockedandcancelled13millionduplicate connections.
Below Press Information Bureau data analysis shows, how many connections have been blocked by Oil
Marketing companies out of 13 million.
Figure 5: Company wise Blocked Duplicate Connection

DBTL: Direct BenefitTransfer of LPG Scheme (PAHAL)
This isan initiative takenbycentral governmentof India,toprovide centrallyfundedamounttothe LPG
customers, a framework had been built with association of national identify program (Unique
Identification(UID) orAadhar).Initiallyscheme hasbeenintroducedinMay2013 and implementedin20
districts.
Under thisscheme,whenevercustomerordera LPG cylinderfromtheirdistributor,subsidypercylinder
will be directly credited to the customer account; later customer has to pay full amount at the time of
delivery. Since there are three key identities involved in DBTL/PAHAL scheme, it is important to
understand three perspective
 Government of India
 Check on unauthorized usage and weed out inefficiencies from supply chain
 Give option to customers to opt out from subsidy
 Check on multiple connections: Aadhaar based De-duplication.
 Enhancement customer services
 LPG Consumers
 LPG subsidy directly credited in customer’s bank account automatically.
 With removal of incentive for diversion, the entitlement will be protected
 Ease of getting new LPG connections in the market.
 Reduction in backlog due to improvement in supply chain
 Oil Marketing Companies (OMC)
 Reduced operational expenditure and less administration
 Reduction in number of problems related to illegal usage, delayed deliveries and diversions
 Ease of auditing Subsidy expenditure (under-recoveries)
 Enhanced consumer relationship management
 Improved qualityof consumer database which can be further used for data mining, later can be
designed for new marketing strategies
 Removal of duplicate/ghost connections
In firstyear of DBTL scheme i.e. FY 2013-14, total 1380 crore has beendirectlycreditedtothe customer
account. In next fiscal i.e. FY 2014-15, total subsidy expenditure under this scheme is 2500 crore.
Under this scheme, Government initiated a campaign i.e. GiveItUp, asking the people of this nation to
give uptheirLPG subsidy.Thiscampaigntargetscustomerswhocan affordLPG cylinderonmarketprice.
With this campaign Government got a positive response in the initial phase, as communicated by
Government if 3 lakhs customer leaves LPG subsidy, Government saves 100 Cr. Till 15th
March 2016,
9007875 had left their LPG subsidy.
3.4.3. Transparency Portal
Creatingawarenessonvariousaspectsof salesanddistributionof LPGwhichisaffectingthe transparency
Portal was launched on 22nd June 2012. The informationis provided at www.indane.co.inby Indian Oil

Corporation Limited, www.ebharatgas.com by Bharat Petroleum Corporation Limited and
www.hindustanpetroleum.com by Hindustan Petroleum Corporation Limited.
Following information is available on transparency portal:
 There isa separate columnforNDCEcustomers.
 Streamline processof lodgingof complaints
 SurrenderconnectionandDeliverylastdate
 Subsidyamount- Month-wise oDistributorName basedselection
 Numberof waitlistcustomersandlastdate of new connectionbookingreleased.
 CustomerstoviewMultiple connections
 DistributorsRatingwithrespecttoTime of Delivery
 Seedingstatusof AadhaarwithBanksand Distributors
3.4.4. MobileApplication
LPG users in urban areas are very tech-savvy. LPG mobile application made accessing information &
serviceseasyandconveniently.Thismobileapplicationisfriendlytoandroidaswell asApple phonesand
can do various web functions from their phones such as new connection booking for second cylinder,
booking, refill booking, solving complaints, history of supplies, repairing hotplate, connections
surrendering, and distributors rating. It is a channel for OMCs to educate customers on the safety, new
initiatives and schemes etc.
Accordingto Google Playstore,total numberof applicationdownloadsare 1 Lakh withan average rating
of 3.9 stars out of 5. Throughthe customerfeedbackanalysis,itisevidentthat,MyLPG applicationneed
modification to become hassle very app.
3.4.5. Refill Booking through SMS/IVRS
Short Message Service (SMS) and Interactive Voice Response System (IVRS) are introduced by OMC to
bookfor LPG refillsandalso customerscan directlybookrefillsthroughcomputerizedinterface without
human intervention.
To provide better services to customers, the Oil Marketing Companies have adopted Vision 2015 for
Customers satisfaction where in it is targeted to introduce SMS booking in all townswith population of
more than 5 lakhin phasesbeginningwiththe metros.Accordingly,OMCshave introducedthe facilityof
refill bookingthroughSMS/IVRS.HPCL has made it compulsoryto bookLPG refillsonSMS/ IVRSsystem
in the entire State of Kerala and Delhi.

4. LPG Demand
LPG demandiscalculatedfrom2015-2020 by consideringbase yearas2011 fromvarioussegments
like
1) TransportationSector
2) ManufacturingSector
3) DomesticLPG
TransportationSector
Consumptionof
LPG (MMT)
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
2013-
14
2014-
15
Base Year
2011(CAG
R)
AutoLPG 0.18 0.23 0.22 0.22 0.21 0.19 0.16 -7%
(Railways
0.0007
9
0.0007
6
0.0009
3
0.0008
4
0.0007
8
0.0007
0
0.0007
6 -2%
Total
Consumption of
LPG 12.19 13.14 14.33 15.35 15.60 16.29 18.02 4%
% of Auto LPG
consumedfrom
total
consumption 0.01 0.02 0.02 0.01 0.01 0.01 0.01 -11%
Source:PNGSTAT2014
LPG consumptionfortransportationasa percentage of overall LPGconsumptioncomesapprox.1%.Also
duringthe past 5 years,demandhaswitnessedanegative CAGRforbothauto andrail usage.
AUTO –LPG:
LPG is an automotive fuel was introduced in India after the issuance of the LPG ( Regulation of use in
Motor Vehicles ) order in year 2001 by MOPNG. PSU oil companies as well as Pvt. Players have setup
AutoLPG dispensingstationsinvariouspartsof the country.Asof 01.10.2015 there are 679 ALDS across
country with highest in Southern Region 331 followed by western region followed by Northern region
128 stationsfollowedby EasternRegion50 stationsand finallythe NorthEasternstateswhichcontains
only 4 ALDS( only in Assam*).
To dispense Auto LPG to registered Vehicles with permanently fitted Auto LPG tanks approved LPG
conversion kits as notified by ministry surface transport, Govt. of India
As of 01.10.2015 679 ALDS have beenset up by oil PSU’sand LPG consumedso far underALDS is 163.8
TMT (2014-15).

Consumptionof AutoLPGhasbeensignificantlydecreasedfrom1.9% to0.91% from 2009 to 2014 which
isgrowingat a negative CAGRof -11%,where asrailwaysconsumptionof LPGfromtotal consumptionis
about less than 1% averagely (from 2009-2014)
ManufacturingSector
Consumptionof LPGMMT 2008-09
2009-
10
2010-
11 2011-12 2012-13 2013-14 2014-15
Manufacturing( BULK) 0.1193 0.14178 0.16515 0.1863 0.14478 0.1347 0.20792
Total Consumption of LPG 12.191 13.1354 14.3319 15.35 15.60064 16.294 18.01855
% of Manufacturing(
BULK LPG) consumedfrom
total the consumption 1% 1% 1% 1% 1% 1% 1%
Source:PNGSTAT2014-15
LPG consumptionformanufacturingsectorasa percentage of overall LPGconsumptionalsocomes
approx.1%.
OUT LOOKOF DEMAND:
DEMAND(MMT)
2014-
15
2015-
16
2016-
17
2017-
18 2018-19
2019-
20
Scenario A 19.44 20.9952 23.0947 25.866 28.97002 32.446
Scenario B 19.26 20.6082 22.0508 23.594 25.24593 27.013
Scenario C 19.08 20.2248 21.4383 22.725 24.08806 25.533
Source:Analysisbased outof PNGSTAT2014-15, MOPNG (annual report2014)
3 scenariosare made here consideringthe demandformAutoLPG,BulkLPGand alsodemandexpected
fromdomestichouseholds,withthe roll outof new scheme fromthe Govtof India( Pradhan Mantri
Ujjwala Yojana - Scheme for Providing Free LPG connections to Women from BPL
Households ). AsperPR’s thisScheme wouldbe implementedoverthree years,namely,the FY2016-
17, 2017-18 and 2018-19, have consideredwhile calculatingthe demand
Hence optimisticDemandfor LPGby 2020 wouldbe around32.4 MMT and pessimisticone wouldbe
around25.5 MMT. In the pessimisticscenario,we assume thatthere will be nodemandfromAutoLPG,
BULK LPG and alsofromDomesticLPG (remainsatthe same level of consumptionasper(2014-15)

Source:Analysisbasedon VariousMacroeconomicFactorslike GDP,Percapitaincome, demandfrom
Auto,Bulk&Domestichave takenintoconsideration
Rural andUrban Access:
Table 6: Rural and urban penetration of India as of 2014(statistics Extracted from PPAC)
Urban Rural Total
No. of House Holds in (mn) 78.87 167.83 246.7
LPG connections(mn) 55.38 35.24 90.62
Penetrations(mn) 71% 21% 36.73
Source:MoPSI and PPACAs per2014
As per 2014, the penetrationof LPG across urban Indiais around 71% and in Rural India is around 21%,
with the total numberof LPG connectionsin(mn)90.62. But as of 01.10.2015 there are almost 18.19
crores of LPG customersacross India.
19.4 21.0 23.1 25.9 29.0 32.4
19.3 20.6 22.1 23.6 25.2
27.019.1 20.2 21.4
22.7
24.1
25.5
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
OUTLOOK OF LPG-DEMAND(MMT)
Scenario A Scenario B Scenario C

State-WiseDemand
Table 7: State- Wise LPG Demand
STATE/UT DOMESTIC
NON-
DOMESTIC TOTAL 14.2 KG 5 KG TOTAL
JAMMU & KASHMIR 22.6 0.15 22.75 22.51 0.1 22.6
HIMACHAL PRADESH 19.7 0.35 20.05 19.61 0.09 19.7
PUNJAB 77.96 0.65 78.61 77.85 0.11 77.96
CHANDIGARH 4.13 0.04 4.17 4.13 0 4.13
UTTARAKHAND 29.54 0.33 29.87 29.5 0.04 29.54
HARYANA 55.73 0.46 56.18 55.7 0.03 55.73
DELHI 62.64 0.46 63.1 62.64 0 62.64
RAJASTHAN 93.44 0.97 94.41 93.31 0.13 93.44
UTTAR PRADESH 226.91 1.09 228 226.56 0.36 226.91
BIHAR 69.37 0.27 69.64 69.32 0.05 69.37
SIKKIM 1.64 0.03 1.67 1.63 0 1.64
ARUNACHAL PRADESH 2.56 0.02 2.58 2.56 0 2.56
NAGALAND 2.41 0.03 2.44 2.4 0.01 2.41
MANIPUR 4.03 0.01 4.04 4.03 0 4.03
MIZORAM 3.02 0.02 3.04 3.02 0 3.02
TRIPURA 4.83 0.02 4.85 4.83 0 4.83
MEGHALAYA 1.95 0.05 2 1.95 0 1.95
ASSAM 37.02 0.24 37.26 36.99 0.02 37.02
WEST BENGAL 112.95 0.97 113.9 112.89 0.06 112.95
JHARKHAND 21.72 0.14 21.86 20.85 0.87 21.72
ODISHA 34.57 0.21 34.79 34.51 0.06 34.57
CHHATTISGARH 21.68 0.17 21.85 21.51 0.17 21.68
MADHYA PRADESH 81.54 0.76 82.3 81.38 0.16 81.54
GUJARAT 83.49 1.55 85.04 83.45 0.04 83.49
DAMAN & DIU 0.7 0.02 0.72 0.7 0 0.7
DADRA & NAGAR HAVELI 0.74 0.02 0.76 0.74 0 0.74
MAHARASHTRA 225.79 2.98 228.8 225.57 0.22 225.79
ANDHRA PRADESH 122.97 0.92 123.9 122.93 0.04 122.97
TELANGANA 96.59 0.77 97.36 96.56 0.03 96.59
KARNATAKA 114.46 2.39 116.9 114.38 0.08 114.46
GOA 5.65 0.13 5.79 5.65 0 5.65
LAKSHADWEEP 0.05 0 0.05 0.05 0 0.05
KERALA 86.69 1.83 88.52 86.61 0.08 86.69
TAMIL NADU 176.38 3.85 180.2 176.34 0.04 176.38
PUDUCHERRY 3.82 0.07 3.89 3.8 0.02 3.82
ANDAMAN & NICOBAR ISLANDS 0.9 0.01 0.91 0.9 0 0.9
ALL INDIA 1910.17 21.98 1932 1907.4 2.81 1910.17

LPG Customersby Region
Source: PPAC
4.1. LPG Supply
The largestproducerof liquefiedpetroleumgasesisbyfarthe USA,ataround60 milliontonnesperyear.
In the USA, substantial quantitiesof LPGare releasedinthe extractionof unconventional natural gases.
The USA are followedbythe oilandgasproducersof theMiddleEast(SaudiArabia,UnitedArabmirates),
China and Russia.
The largest consumers of LPG are the USA, China and Saudi Arabia, and other mainly Asian countries
such as Japan, India, Thailand and South Korea (WLPGA/Argus 2014). Nearly half the world’s supply of
LPG is consumedbythe domesticsector,in heatingandcooking.Anothermajor customerfor liquefied
petroleum gases is the petrochemical industry. By contrast, the transport sector accounts for
only about one-tenthofworldLPGconsumption.MaincentresforLPGapplicationsto transportare Asia
and Europe. Top 5 Countries of World Producing and Consuming LPG:

Table 8: World’stop 5 LPG producers Table 9: World’stop 5 LPG consumers
LPG PRODUCERS QTY(Mlnt)
USA 59.4
SAR 24.7
CHI 24.6
RUS 14.2
UAE 12.2
4.2. Current availability of LPG in India
Productionof LPGin Indiahasdecreased from 10345 MMT to 9840MMT duringthe period2009-
10 fiscal year to 2014-15. Imports also Increased during the same year from 2718MMT to
8813MMT withthe CAGR growthof 20% alsothe consumptionof LPG hassignificantlyincreased
from 13135.3MMT to 18000MMT with a CAGR growth of 5%
Table 10: LPG Supply Mix
Years
2009-10
2010-
11
2011-12 2012-13 2013-14 2014-15
LPG-IMPORTS 2,718 4,484 5790 6293 6607 8313
LPG Consumption 13135.3 14331 15350 15601 16294 18000
LPG EXPORTS 131 154 174 200 227 254
LPG production 10345 9624 9554 9830 10032 9840
Source: Analysis based on PPAC data
PG
CONSUMERS QTY(Mlnt)
USA 52.8
CHI 27.6
SAR 17.6
JAP 16.9
IND 16.3

Source: Source: Analysis based on PPAC data
 Total LPG consumption&importsstands at 18000 TMT & 8313 TMT respectivelyin2014-15. Higher
import dependency seen over 2009-15 – up from 20.6% to 46.16%.
 Total LPG consumption grew at 6.53% CAGR in FY09-FY15 whereas LPG imports grew by 25.07% in
same period.
4.3. LPG Supply Mix
Source: Analysis based on PNG Stat (in million metric ton)

IndigenousLPGproductionalmoststagnantfor lastfive years.HigherimportdependenciesforLPG seen
over 2009-14 – up from 20.8% to 39.7%. LPG Imports form nearly 40 % of petroleum product imports,
importsare detrimental exposingtosupply& price risks inreal terms.Importsleadingto investmentsin
dedicated LPG import terminals Efficient utilization of existing port infrastructure for exports restricted
due to LPG imports.
4.4. Production of LPG from refineries (During the period 2014-15)
Table 11: Production of LPG from refineries (During the period 2014-15)
S.No
Refinery/Plant LPG Total Production %of LPG as from total
productionof petroleum
products
1
IOC, Guwahati 41 1067
4%
2
IOC, Barauni 292 5412
5%
3 IOC, Koyali 568 12492 5%
4 IOC, Haldia 251 7008 4%
5
IOC, Mathura 337 8243
4%
6 IOC, Digboi 9 591 2%
7 IOC, Panipat 674 14110 5%
8
IOCL,Bongaigoan, Assam 53 2186
2%
9
BPCL, Mumbai 429 12346
3%
10 BPCL, Kochi 526 9803 5%
11
HPCL, Mumbai 379 7030
5%
12
HPCL, Vishakhapatnam 429 8241
5%
13
CPCL(MRL), Manali 327 9421
3%
14
CPCL(MRL), Narimanam 15 539
3%
15
NRL, Numaligarh 54 2754
2%
16
MRPL, Mangalore 502 13169
4%
17
ONGC, Tatipaka 0 50
0%
18
RPL, Jamnagar 393 30864
1%
19 RPL,SEZ 872 39329 2%
20
EOL, Vadinar 768 19804
4%
21 BORL,Bina 194 5782 3%
22
HMEL,Bathinda 548 6900
8%
Total Refinery 7662 217141
Average ( 4%)
Source: PNG STAT 2014-15

Asof nowfromour refineries4%of the LPGisextractedaveragely,sokeepinginfurtherdemandinnear
future Indiaasa country needtoimportmore of propane andbutane fromothercountrieslike Gulf and
Saudi .
Apart from the production at oil refineries, LPG is extracted from natural gas (from the above table).
Of about 15% demand met through fractionators, 51% through refineries & rest of our demand met
throughimportsi.e almost34%( Average) duringthe period2009-14, where as the bottlingplantshave
increasedsignificantlyacrossthe country from 8967TMTPA to 14044TMTPA during the period2009-14
which is expected increase in near future to meet the demand.
Source: PNG Stat 2014-15
Source: PNG Stat 2014-15

New Refineries:
Table 12: New Refineries in India
S.no
Name of
the
Company
weather
PSU or JV
or Pvt
Location of
Refinery
Capacity
MMTPA
Expected Date of
Commission
1 IOCL PSU
Para dip,
Orissa 15 StartedonFeb-06th 2016
2 HPCL PSU
Barmer,
Rajasthan 9 Last quarter of 2017
IOCL Paradip:
IOCL's Paradip refinery is tipped to be the most modern refinery in the country with a nil -residue
production,andthe productswouldmeetstringentspecifications.IndianOilhastakenover3344 acresof
land for the project.
The refinerywouldbe equippedwithfirstof itskindtechnological featureslike flue gas, de-sulphurization
facilities and vapour recovery system from jetty loading. These features are expected to ensure
environment friendly operations of the refinery with minimal impact on the environment
The INDMAX unitwitha capacityof 4.17 milliontonne perannumisbasedonthe indigenoustechnology
developedbyIOCL.Thisunitmarksa major steptowardsindigenoustechnologydevelopmentinthe
country
LPG produced at the Paradip complex will be fed to both the North East region and the South through
pipelines - one from Paradip to Durgapur and another from Paradip to Hyderabad. The pipeline to
Hyderabad will see work begin on it soon.
But the INDMAX unit itself is a huge step forward for Indian Petroleum production R&D. IOCL’s R&D
departmentholdsthe proprietarytechnologyforthe unitandat a feed-to-LPGconversionpercentage of
44%, the unit has performance figures nearly double that of the global average of 21-22%.
Typical yield:
Table 13: Typical product yields, wt% of feed
LPG 30 – 55
Gasoline 20 – 40
Propylene 12 – 27
Butylenes 10 – 20
Ethylene 3 – 14
With the help of INDIMAX technology LPG is extracted from the feed as 44% ,the unit has performance
figures nearly double that the global average of 21~22%

HPCL, Barmer Refinery:
HPCL to set up a 9 million tons per annum petroleum refining-cum-petrochemical complex at Barmer.
The projectcostisestimatedatRs37,230 crore,whichwill makeitIndia'scostliestrefinery,withthe cost
per million tons capacity exceeding Rs 4000 crore .
4.5. Rural and Urban Distribution of LPG
Source: PPAC

4.6. Ports& Import Terminals
2
BPCL
IOCL
(0.6MT)
HPCL
IOCL
(0.6MT)
1
(MMTPA)
0.6
(MMTPA)
0.6
(MMTPA)
0.20
(MMTPA)
0.2
(MMTPA)
0.25
(MMTPA)
0.20
(MMTPA)
Source: Analysis based up on PNG STAT and MOPNG (annual report 2014-15)

Port Wise details and POL as %age of total traffic at the port:
Table 14: PortWise and POL as %age of total trafficat the port
Name of the port Year Total
Traffic
POL Traffic POL as %age of total traffic at the
port
Kolkata/Haldia 2008-09 54.05 20.31 37.60
2009-10 46.30 10.08 21.80
2010-11 47.43 11.65 24.60
2011-12 43.24 8.58 19.80
2012-13 39.88 6.90 17.30
2013-14 41.38 6.82 16.50
2014-15 46.29 6.13 13.24
Mumbai 2008-09 51.88 34.87 67.20
2009-10 54.54 36.60 67.10
2010-11 54.59 33.23 60.90
2011-12 56.19 33.31 59.30
2012-13 58.04 34.78 59.90
2013-14 59.18 35.98 60.80
2014-15 61.66 36.28 58.84
Chennai 2008-09 57.49 13.11 22.80
2009-10 61.06 13.43 22.00
2010-11 61.46 13.88 22.60
2011-12 55.71 13.29 23.90
2012-13 53.40 13.42 25.10
2013-14 51.11 12.78 25.00
2014-15 52.54 12.74 24.20
Cochin 2008-09 15.23 10.49 24.25
2009-10 17.43 11.46 65.70
2010-11 17.47 12.10 69.30
2011-12 20.09 14.01 69.70
2012-13 19.85 13.90 70.00
2013-14 20.89 14.32 68.50
2014-15 21.60 14.02 64.91
Kandla 2008-09 72.23 45.54 63.00
2009-10 79.52 47.21 59.40
2010-11 81.88 48.43 59.10
2011-12 82.50 46.94 56.90
2012-13 93.62 54.36 58.10
2013-14 87.01 53.14 61.10
2014-15 92.48 55.59 60.11
Visakhapatnam 2008-09 63.91 19.76 30.90
2009-10 65.50 18.29 27.90

2010-11 68.04 19.27 28.30
2011-12 67.42 18.44 27.40
2012-13 58.96 15.02 25.50
2013-14 58.50 14.01 23.90
2014-15 58.01 14.64 25.24
Mormugao 2008-09 41.68 0.90 2.20
2009-10 48.85 0.96 2.00
2010-11 50.02 0.94 1.90
2011-12 39.00 0.92 2.40
2012-13 17.69 0.82 4.60
2013-14 11.74 0.53 4.50
2014-15 14.71 0.57 3.87
J.N.P.T. 2008-09 57.28 5.37 9.40
2009-10 60.75 6.08 10.00
2010-11 64.30 5.13 8.00
2011-12 65.75 4.93 7.50
2012-13 64.50 4.29 6.70
2013-14 62.33 4.41 7.10
2014-15 63.80 4.03 6.32
Paradip 2008-09 46.41 3.24 7.00
2009-10 57.01 11.65 20.40
2010-11 56.03 12.85 22.90
2011-12 54.25 15.09 27.80
2012-13 56.55 16.47 29.10
2013-14 68.00 17.70 26.00
2014-15 70.94 17.97 25.33
Tuticorin (VOC Prot) 2008-09 22.01 0.50 2.30
2009-10 23.79 0.51 2.10
2010-11 25.73 0.74 2.90
2011-12 28.10 0.84 3.00
2012-13 28.26 0.79 2.80
2013-14 28.64 0.48 1.70
2014-15 32.41 0.61 1.88
New Mangalore 2008-09 36.69 21.33 58.10
2009-10 35.53 21.34 60.10
2010-11 31.55 21.55 68.30
2011-12 32.94 22.25 67.50
2012-13 37.04 24.30 65.60
2013-14 39.37 24.65 62.60
2014-15 36.57 22.97 62.81
Ennore 2008-09 11.50 0.36 3.10
2009-10 10.70 0.40 3.70
2010-11 11.01 0.59 5.40

2011-12 14.96 0.50 3.30
2012-13 17.89 1.12 6.30
2013-14 27.34 2.34 8.60
2014-15 30.25 3.19 10.55
Grand Total 2008-09 537.65 177.45 33.00
2009-10 560.98 178.01 31.70
2010-11 569.51 180.36 31.70
2011-12 560.15 179.10 32.00
2012-13 545.68 186.17 34.10
2013-14 545.68 186.17 34.10
2014-15 581.26 188.74 32.47
LPG –Pipelines in India:
Source: - Representationbasedon PPACdata( extractedfrom product pipelinesdata Map)

Auto LPG:
LPG is an automotive fuel was introduced in India after the issuance of the LPG( Regulation of use in
Motor Vehicles ) order in year 2001 by MOPNG. PSU oil companies as well as Pvt. Players have setup
AutoLPG dispensingstationsinvariouspartsof the country.Asof 01.10.2015 there are 679 ALDS across
country with highest in Southern Region 331 followed by western region followed by Northern region
128 stationsfollowedby EasternRegion50 stationsand finallythe NorthEasternstateswhichcontains
only 4 ALDS( only in Assam*).
To dispense Auto LPG to registered Vehicles with permanently fitted Auto LPG tanks approved LPG
conversion kits as notified by ministry surface transport, Govt. of India
As of 01.10.2015 679 ALDS have beenset up by oil PSU’sand LPG consumedso far underALDS is 163.8
TMT(2014-15)
Consumptionof AutoLPGhasbeensignificantlydecreasedfrom1.9% to0.91% from 2009 to 2014 which
isgrowingat a negative CAGRof -11%,where asrailwaysconsumptionof LPGfromtotal consumptionis
about less than 1% averagely ( from 2009-2014)
LPG CONSUMPTIONUNDERTRANSPORTATION SECTOR:
Table 15: LPG CONSUMPTION UNDER TRANSPORTATION SECTOR
Consumption
of LPG
(MMT)
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
2013-
14
2014-
15
Auto LPG 0.18195 0.22528 0.2239 0.2237 0.2148 0.195 0.1638
Railways 0.00079 0.00076 0.0009 0.0008 0.0008 0.0007 0.0008
Total
Consumption 12.1913 13.1354 14.332 15.35 15.601 16.294 18.019
% of Auto
LPG
consumed
from total
consumption 1.49% 1.72% 1.56% 1.46% 1.38% 1.20% 0.91%
Source: PNG STAT 2014-15

Current- Infrastructure:
Table 16: CurrentInfrastructure of LPG inIndia
Source: IOCL
The existingratedandachievable importterminalcapacitiesare givenabove.
Up- Coming INFRASTRUCTURE:
Table 17: Up- Coming INFRASTRUCTURE
NAME OF THE
PORT
INVESTEMENT
IN( CRORES)
IMPORT
TERMINAL
CAPACITY(MT)
ENTITY TO
BUILD
HALDIA 1200
HANDLE TWO
VLCC BPCL
PARADIP 690 0.6 IOCL
EAST-COAST 500 NotMentioned HPCL
KOCHI 217 0.6 IOCL
Source: PIB
Withthe additionof newinfrastructureatParadipandkochi byIOCLwhichcan caterthe demandacross
southern&Easternstates. The ParadiptoDurgapurstretchof the pipelinewillbe readybythe nextyear(
as per news articles )State-run Bharat Petroleum Corporation Limited (BPCL) plans to build an import
terminal at West Bengal's Haldia, with an estimated cost of Rs 1,200 crore. The terminal will help the
company meet the rise in demand for liquefied petroleum gas The capacity of the planned terminal
wouldbe two15,000-tonne tanks,whichwill be capable of handlingthe VLCC(verylarge crude carriers)
vessels, which have taken in to consideration while projecting future supplies
Company Port Name
Rated Capacity
(TMTPA)
Achievable
(TMTPA)
Aegis Mumbai 300 120
HPC,TOTAL Manglore 1000 1600
SALPG,EIPL Vizag 1000 1200
GCPTCL Dahej 300 300
BPC Mumbai 300 400
IOC Kandla 600 1000
IPPL Ennore 600 1200
IPPL Haldia 600 1200
SHV Tuticorin 300 120
Total 5000 7140

4.7. LPG bottling plants
Source: Analysis based on PPAC data
LPG- SUPPLY:
Table 18: Analysis based on PPAC, PNG Stat, MOPNG (Annual Reports)
SUPPLYMMT
2014-
15
2015-
16
2016-
17
2017-
18 2018-19
2019-
20
Scenario A 19.11 19.95 22.52 28.65 28.97 30.54
Scenario B 19.11 19.95 22.52 23.42 23.74 24.11
Scenario C 19.11 19.95 20.82 21.12 21.44 21.81
Source:Analysisbasedon PPAC,PGNSTAT2014-15(document) &MOPNG annual report2014-15
3 scenariosare made here consideringthe commissioning of new refineries,LPGterminalsasvariables.
Hence optimisticsupplyofLPGby2020 wouldbe around30.54MMT andpessimisticone wouldbe around
21.81 MMT. In the pessimistic scenario, we assume that refinery capacity addition and LPG terminal
commissioning lags behind the anticipated timeline

Source: Analysis based on PPAC, PNG Stat, MOPNG(Annual Reports)
5. LPG – Access &Affordability
Cost Economic Analysis
As discussedearlier,69%population belongstothe rural area.Most of the rural area inIndiastill
dependsuponthe traditional usage of cookingfuel.Hence itisimportanttounderstandthe cost
associatedorcost beardby the consumerwhile utilizingaparticularfuel.Below isthe costanalysis
betweendifferentcookingfuelsavailableinrural India.
Traditional fuels:
Source: Collected from WLPGA
19.11 19.95 22.52 23.87 26.58 28.15
19.11 19.95
22.52 23.42 23.74 24.11
19.11 19.95
20.82 21.12
21.44 21.81
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
OUT LOOK OF LPG -SUPPLY (MMT)
Senario A Scenario B Scenario C

Table 19: Estimation of costof DifferentCookingfuels(Price associatedisapplicable toMumbai)
Attributes LPG Coal Kerosine Wood PNG Cow Dung
Cake
Calorificvalue 11300 4500 10450 3500 8600 3700
Energy consumptionper day 2637.7 2637.7 2637.7 2637.7 2637.7 2637.7
Units Rs/Kg Rs/kg Rs/ltr Rs/Kg Rs/SCMD Rs/kg
Price per unit 29.5 8 15.2 15 25.3 10
No. of Unitsconsumedper day 0.2 0.6 0.3 0.8 0.3 0.7
Cost of fuel perday 6.9 4.7 3.8 11.3 7.8 7.1
Source:AnalysisbasedonPPACstats.All Pricesare subjectedtoDelhi Market
From the table above, it’sunderstandablethatLPGoffersa highCV comparedto Coal,Kerosene and
PNG.Cost of fuel to consume anaverage energyof 2637.7 perday wouldcome toRs. 6.9 comparedto
4.7 for coal,3.8 forcoal, 7.8 forPNG. Hence LPG isindeedabetteralternative tocoal/keroseneif we
considerthe environmentalconsiderationsandease of use of fuel etc.
Understanding LPG Affordability
Table 20: Costof LPG consumptionPerdayinboth Rural and Urban Areas
Region Rural Urban
No.of cylinders No 6 9
Cylinder capacity kgs/cylinder 14.2 14.2
Calrofic Value of LPG Kcal/kg 11300 11300
No.of days in an Year days/year 365 365
Cost of LPG cylinder( Subsidised) Rs/14.2kgs Cylinder 415 415
LPG consumption per day Kg/day 0.23 0.35
Energy Consumption Per day Kcal/day 2640 3960
Cost of LPG consumption Per day Rs/day 7 10
From the above table the energy consumption per day in rural and urban Indian families are 2640
Kcal/dayand3960 kcal/day,onassumingthatthe average numberof6cylindersrequiredforarural family
per year, whereas urban family requires 9 cylinders per year
Accordingtothe above analysisthe costof LPGconsumptionperdayis7Rs/dayinrural areasandinurban
areas 10 Rs/day (prices are subjected to LPG subsidised Cylinder). The annual expenditure that a rural
family spends on LPG is about 2490 RS/Annum similarly and urban family spends about 3734.68
Rs/Annum. Hence it is not the problem of affordability according to the 2011 census , the No of

households with monthlyincome of highest earning householdmembers < 5000 is 13.3 Crore , implies
60,000 per annum, of which about 4% need to spend on LPG in rural area and in urban about 6.2%.
% of Households with monthly Income of highest earning household member w.r.t Total HH , <5000 is
about 74.02, ( 5000 – 10,000)is 17 and > 10,000 is rest 8.98.
Animal Waste
For a substantial partof the world’spopulationthe onlyenergyavailable tothemas their primaryfuel is
waste material fromcrops andanimals.These productsare at the verybottomof the energyladder.The
energy value of these products are not easy to measure because they vary so much in content but one
thing they have in common is they are very difficult to light and burn when wet.
In countrieswhere rainfall canbe intense duringcertaintimesof the yearthisis a major inconvenience.
This also applies to wood, charcoal and coal.
Wood
The most common traditional fuel is wood. Even in the developed world wood is a popular form of
heating. However, the use of wood in the developed world is frequently a secondary form of heat and
used as much for aesthetic reasons as primary heating. It would rarely be used to cook unless it was a
recreational barbeque. For many people wood is the only realistic form of energy available for both
cooking and heating with alternatives being other traditional, equally dirty, fuels.
The taskof collectingwoodisoftenthe taskfor the womeninthe household.Itisa time-consumingand
oftendangerousoccupation as the source of the woodis commonlyin remote locations where personal
attack is a risk. The wood is often collected from small trees, trees that have had no chance to grow to
maturity. Wood taken from large trees is both very difficult to collect, carry and burn. The risk of
deforestation is therefore greater because the trees have been cut at the early stage of their life.
Wood is difficult to burn when wet creating challenges during the wet seasons. It also has to be stored
and kept dry.
The cost of fuel perdayisabout11.3 Rs/dayonassumingRs.15 per kgas wood,thisimpliesabout4124.5
Rs/year or about 6.8% of their income if the income group falls under 60k per annum(BPL).
Coal
Charcoal and coal are also dirtyto handle and coal oftencontainscontaminantsthat make its emissions
evenunhealthierthanbiomass. The distributionchannel forcharcoal is oftenthrough road side stalls.It
is frequently the task for small children to collect the daily amount of charcoal needed to cook for the
family.
Thisis oftendone usingplasticbagswhichrefilledandweighedbythe stall holder.Coal is alsosoldinthe
formof briquettes.Some of the oldercoal briquetteshave holesthroughthem tofacilitate burning. Coal
briquettes were burnt in specially designedcooking stoves oftenmade from clay. Nowadays briquettes
can be burned in a variety of more advanced biomass cook stoves.

The cost of coal consumed per day for cooking purpose is about 4.7 Rs/day which is about 1715.5
Rs/annum. On assuming the cost of coal is about Rs 8per kg.
Kerosene
There is also growing recognition that the emissionsfrom burning kerosene in simple lamps and stoves
causes ill-health in much the same was as biomass smoke.
The cost of kerosene consumed per day for cooking purpose is about 3.8 Rs/day which is about
1387Rs/annum. The cost of SKO is about Rs 15.2per ltr. As per Mumbai state price build up of SKO
subsidised.
Processed Bio mass
A newformof traditional fuelnowavailableis processed biomass.Raw biomassusuallyhasahighcontent
of volatile matter and ash and lower density and energy values. Processing the biomass into compact,
evenlysizedpiecessuchas briquettesorpelletsallowsthe biomasstoburn more efficientlyand evenly,
increasing their energy density. These processed traditional fuels are available now in pellets and
briquettes(carbonized andnon-carbonized) andare made fromsawdust,agricultural residuesandother
raw materials. While notascleanas LPG, theyformpart of the non-fuel,non-liquidcookingfuel mixand
are alternatives that offer more benefits than burning raw solid unprocessed biomass.
The cost of Bio -Mass consumed per day for cooking purpose is about 7.1 Rs/day which is about 2591
Rs/annum. On assuming the cost of cow dung is about Rs 15 Rs/Kg.
Table 21: Household income distribution of India in rural and urban areas is given below.
STATE/UT Total Households
No. of Households with monthly Income of highest earning
household member
< 5000
5000 -
10000
> 10000
JAMMU & KASHMIR 1601606 1080174 232753 288670
HIMACHAL PRADESH 1263500 676312 279861 307326
PUNJAB 3269467 1881889 813841 571951
CHANDIGARH 15657 7046 5119 3492
UTTARAKHAND 1479742 938356 323538 217848
HARYANA 2969509 1750716 732974 483377
DELHI 1051097 307524 443975 299598
RAJASTHAN 10223073 7474932 1759192 981788
UTTAR PRADESH 26015544 18635325 5223270 2136158
BIHAR 17829066 12667269 3959714 1196190
SIKKIM 88723 64762 11432 12400
ARUNACHAL PRADESH 201510 144676 29072 27759
NAGALAND 284310 198496 42314 43495
MANIPUR 448163 290868 90333 66952

MIZORAM 111626 85974 14777 10875
TRIPURA 693469 553240 83553 56181
MEGHALAYA 485897 363652 77847 44393
ASSAM 5743835 4416524 834420 492736
WEST BENGAL 15756750 12994091 1812566 948770
JHARKHAND 5044234 3866210 781824 387727
ODISHA 8624075 7579496 631689 410858
CHHATTISGARH 4540999 4122115 269673 145294
MADHYA PRADESH 11288946 9424603 1274665 589600
GUJARAT 6920473 4752481 1505245 662243
DAMAN & DIU 31795 14491 11461 5842
DADRA & NAGAR HAVELI 45352 31371 9792 4189
MAHARASHTRA 13834092 9813065 2515389 1502517
ANDHRA PRADESH 9344180 7430191 1462316 436383
TELANGANA 5643739 4249143 1063997 327526
KARNATAKA 8048664 5560356 1792649 694617
GOA 220731 88335 74568 57667
LAKSHADWEEP 10929 4713 1496 4720
KERALA 6319215 4471062 1073989 774163
TAMIL NADU 10088119 7868873 1614901 603035
PUDUCHERRY 115249 80134 20978 14136
ANDAMAN & NICOBAR ISLANDS 68481 34736 14477 19268
ALL INDIA 179721817 1.34E+08 30889660 14829744
Source: Census 2011
Below poverty line
Accordingto the reportof the committee,the new povertyline shouldbe Rs30 in rural areasand Rs 47
inurban areas.The earlierpovertyline figurewasRs27 for rural Indiaand Rs 33 for Urban India.
The Rangarajanreport hasadded93.7 millionmore tothe listof the poorassessedlastyearas perthe
SureshTendulkarcommitteeformula. Now the total numberof poorhasreached363 millionfrom269
millionin2011-12.Thisraise in the povertyline income barmeans93.7 millionmore people are now
belowpovertyline(BPL).
Table 22:No.of Rural and Urban PoorinIndiaby Rangarajanand Tendulkarcommittee
No. of Rural
poor No. of urban poor Total
Percentof
poor
Rangarajan Committee 260.5 million 102.5 million 363 million 29.5
Tendulkar committee 216.5 million 52.8 million 269 million 21.90%
Difference 44 million 49.7 million 93.7 million

Source: PR’s and PIB
For 2009-10, the povertyline wastakenasRs.28.65 in urbanareas and Rs.22.42 in villages.Usingthese
the povertyrate declinedby7.8%pointsintwo years, to22 percentof the populationin2011-12 from
29.8% in2009-10. Accordingto the Rangarajan Committee panelrecommendedraising the, poverty
linesfor2011-12 to Rs 47 a day in urbanareas andRs 32 a day in villages, andfor2009-10 to Rs.40 and
Rs.27 respectivelycomparedtothe Tendulkarmethodology.
As suchfrom the (above graphs) the povertyfellto29.5% in 2011-12 from38.2% in 2009-10, butthe
rate wasmuch higherthaninthe Tendulkarmethod.
EstimationBPL Families inCr’s by two committees
Table 23: Estimationof BPLby variouscommittees
Committees Tendulkar c. Rangarajan
Setup by PlanningCommission PlanningCommission
SetUp In 2005 2012
SubmittedReport 2009 2014
PovertyEstimationMethod
Percapita Expenditure
Monthly
MonthlyExpenditure of
familyof five.
Urban PovertyLine PerDay per
Person 33 47
Urban PovertyLine PerMonth per
Person 1000 1407
Urban PovertyLine PerMonth,
Familyof Five Members 5000 7035
Rural povertyline PerDayPerPerson 27 32

Rural povertyline (Rs) perMonthPer
Person 816 972
Rural povertyline (Rs) Per month
FamilyOf Five Members 4080 4860
BPL ( BelowPovertyLine ) Incrore 27 Crore 37 Crore
Source: PR’S
6. Barriers
India in recent years has one of the largest LPG market with consumption 18 mMt and around 18.5
registeredhouseholds.LPGdemandinparticularto domesticusage fromlast 10 years has beengrowing
steadily in urban areas as well as in semi- urban areas whereas rural areas still considered to be the
bottleneck.Thoughwiththe passage of time,Governmentof Indiahas takenvariousinitiativesinterms
of reformsinmodifyingdistributionchannelsandsubsidymechanism, butstillLPGpenetrationinspecific
to rural areas are weak.
There are several factorsthat define the low penetrationrate of LPG consumptioninrural India.Though
Government have identified the key barriers and implemented required reforms but still these factors
prevails as bottleneck. Some of the key barriers are:
 Lack of Safety Culture and Health Hygiene
 Lack of Purchasing Power
 Packaging – Select the Right Size
 Distribution Channels: RGGVY
 Tedious Registration Process: Rural Areas
 Governing Policies and Emission Laws
7. Suggested approach
 Integrating with post offices for Enhancing LPG penetration through:
 Financial support(through various schemes like post office savings schemes)
 Utilize the postoffice forone stop solutionforpenetrationof LPG inrural areas, we have almost
89.7% of post offices are in rural areas
 Use as a promotional channel
 Integrate with various Schemes of Post life insurances or policies
 Promoting LPG through" DWACRA” Groups example : states like AP, Telangana)
 Alternate route of marketing via PDS centers to help in penetrating rural market
 Innovation is required in distributing LPG in the rural areas, beyond the traditional realm of a
dealershipmodel.Leveragingrural supplychains,onlyforthe deliveryof the regulatedcommodity,
could be one such approach.

 Make LPG available atkirana,Markets( 5kgs cylinderbecause itdoesn'trequireanyconnection ) in
order to have more accessibility
 To reach bottom of the pyramid utilize Co-operative banks as a source **
 Elected members in Each ward of Panchayat must be put in loop ( for promotions ) / mandatory
 Cylinder pooling as viable suggestion for OMC’s
 Improve MaximumCommunitykitchensinrural areas;; sothatthere isno,up-frontcostforfamilies
living in rural areas ,so that viability issue can be solved ;
 No up-front Cost
 Pay as you use
 Approximately4000 distributors need to appoint in order to increase LPG penetration to 75%
from 60%; As of 10.10.2015 there are 15930 distributors. On an Averagely, for every 11418
connections there is one distributor in India (as on 10.10.2015)
 Leverage existinginstitutions such as Self HelpGroups (SHGs) and rural supply chains to deliver
LPG in far flungareas.This wouldhelpaddressthe accessibilityissueswithminimuminvestment
and fiscal outlay, in a short timeframe
 Example: - Odisha state: In four districts of Odisha, 72 SHGs have been supplying LPG
cylinders to around 45,000 rural households since 2004.
 Establish uniform delivery charges per cylinder by pooling the transportation costs at national
level to reduce the price incidence on rural customers and OMCs.
 Raise the awareness of the benefits of LPG consumption. A combination of different strategies
and ways could be used to highlight health and associated benefits of LPG consumption over
inefficient burning of traditional solid fuels.
 Through effective promotions like adopting channels like ,
 Radio
 Playing Skits and drams in rural areas
 Encouragingschool childrentoparticipate effectively incompetitionsmakingthemawareof LPG,
there by mothers will get to know the importance
 Reduce Burden on OMC : Multiple Revenue stream
OMC had startedwebportal and mobile bookingfacilityforLPGbooking,thisstepsurelyconsidered
as value addedservicesthatwill enhance customerconfidence,ashe enjoyshassle free procedure
as comparedto the past. Butin reality, perthe Google Playstore,customersare givingnegative
feedbackaboutthe mobile app.Hence,the scope of improvementwithamobile bookingfacilityis
evident.In addition tore-engineeringof application,OMC’s shouldaskthese questions:Canwe
generate revenuefromweb portal and mobile portal toenhance profitability?Isthere any
possibilityof diversification?
To address, above statedproblemstatements,the suggestiveapproachinvolvesinnovative
marketingstrategiesthatcanfollowedbyOMC’s.First,togenerate more revenue OMCshouldopt
for affiliatemarketingstrategies.Affiliate marketingisthe processof earningacommissionby
promotingotherpeople's(orcompany's) productsorservices.Since the e-commerce industryis

expectedtohave aCAGR of 36% in the nextcomingyears,OMC’sshouldtargetgrowinge-
commerce industrytopromote theirproductsandserviceswiththe usage of theirownonline
portal.
OMC’s shouldclubwithonline retailers. Atpresent,acustomerwill geta12 subsidizedcylinderina
year.We as Indiansare more price sensitive,hence we lookforincentivesandvalue additionwhile
spendingmoney.Withclubbingof these e-retailer,aOMC’scan provide some discountcouponsor
may be attractive dealsonleavingLPGsubsidy.Since FMCGand consumerdurablesare beingsold
at highmargins,againit will create awin-winsituationforbothOMC’sas well asonline retailers.
TransactionCycle:

Process:
8. Further Recommendations:
1) One solutionforviabilityissuesis toencourage CommunityKitchensacrossall rural areasin
Indiaand simultaneously concentrateonurbanpoor
2) Approximately4000 distributorsneedtoappoint to increase LPG penetrationto 75% from 60%;
As of 01.10.2015 there are 15930 distributors. On an Averagely, for every 11418 connections
there is one distributor in India (as on 10.10.2015)
3) Real affordabilitycanbe measuredonlywhenfieldsurveysare done throughrandomsampling
procedure inrural India. 6.9 Rs/dayinrural and 10 Rs/dayinurban Indiaisbasedout of their
consumptionpatterns;cookingfuel asLPG.

9. Appendix
Penetrationof LPGin2001
Source:AnalysisbasedonPPACdata
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
State wise Penetration of LPG
2001
2011
2015

Penetrationof LPG in 2011
Source:Analysis basedonPPAC dataand Census2011

Penetrationof LPG as on 01.10.2015
Source:AnalysisbasedonPPACandCensus2011
LPG distributorsMap in India as of 01.10.2015
Source:AnalysisbasedonPPAC(LPGmarketingprofile document) 2015

Numberof PNG connections
STATE/UT DOMESTIC NON-DOMESTIC
JAMMU & KASHMIR 22.6 0.15
HIMACHAL PRADESH 19.7 0.35
PUNJAB 77.96 0.65
CHANDIGARH 4.13 0.04
UTTARAKHAND 29.54 0.33
HARYANA 55.73 0.46
DELHI 62.64 0.46
RAJASTHAN 93.44 0.97
UTTAR PRADESH 226.91 1.09
BIHAR 69.37 0.27
SIKKIM 1.64 0.03
ARUNACHALPRADESH 2.56 0.02
NAGALAND 2.41 0.03
MANIPUR 4.03 0.01
MIZORAM 3.02 0.02
TRIPURA 4.83 0.02
MEGHALAYA 1.95 0.05
ASSAM 37.02 0.24
WEST BENGAL 112.95 0.97
JHARKHAND 21.72 0.14
ODISHA 34.57 0.21
CHHATTISGARH 21.68 0.17
MADHYA PRADESH 81.54 0.76
GUJARAT 83.49 1.55
DAMAN & DIU 0.7 0.02
DADRA & NAGARHAVELI 0.74 0.02
MAHARASHTRA 225.79 2.98
ANDHRA PRADESH 122.97 0.92
TELANGANA 96.59 0.77
KARNATAKA 114.46 2.39
GOA 5.65 0.13
LAKSHADWEEP 0.05 0
KERALA 86.69 1.83
TAMIL NADU 176.38 3.85
PUDUCHERRY 3.82 0.07
ANDAMAN & NICOBAR
ISLANDS 0.9 0.01
ALL INDIA

BPL Connectionsandsubsidy state wise
STATE/UT
Rural
% of
perso
ns
Urba
n %
of
perso
ns
%
age
Tot
al
Num
ber of
Perso
ns
Rural
(lakhs
)
Number
of
Persons
Urban(la
khs)
New BPL
connecti
ons in
rural
New BPL
connecti
ons in
urban
Subsid
y on
rural
(in
crore)
Subsid
y on
urban
(in
crore)
JAMMU &
KASHMIR 11.54 7.20
10.
35 10.73 2.53 238547 61784 381.67 98.85
HIMACHAL
PRADESH 8.48 4.33
8.0
6 5.29 0.30 117568 7374 188.11 11.80
PUNJAB 7.66 9.24
8.2
6 13.35 9.82 296777 239580 474.84 383.33
CHANDIGARH 1.64 22.31
21.
81 0.00 2.34 94 57157 0.15 91.45
UTTARAKHAND 11.62 10.48
11.
26 8.25 3.35 183305 81802 293.29 130.88
HARYANA 11.64 10.28
11.
16 19.42 9.41 431571 229434 690.51 367.09
DELHI 12.92 9.84
9.9
1 0.50 16.46 11099 401376 17.76 642.20
RAJASTHAN 16.05 10.69
14.
71 84.19 18.73 1870873 456819
2993.4
0 730.91
UTTAR
PRADESH 30.40 26.06
29.
43
479.3
5 118.84
1065223
0 2898514
17043.
57
4637.6
2
BIHAR 34.06 31.23
33.
74
320.4
0 37.75 7119962 920808
11391.
94
1473.2
9
SIKKIM 9.85 3.66
8.1
9 0.45 0.06 9929 1488 15.89 2.38
ARUNACHAL
PRADESH 38.93 20.33
34.
67 4.25 0.66 94410 16047 151.06 25.67
NAGALAND 19.93 16.48
18.
88 2.76 1.00 61322 24288 98.11 38.86
MANIPUR 38.80 32.59
36.
89 7.45 2.78 165461 67708 264.74 108.33
MIZORAM 35.43 6.36
20.
40 1.91 0.37 42357 8934 67.77 14.29
TRIPURA 16.53 7.42
14.
05 4.49 0.75 99773 18398 159.64 29.44
MEGHALAYA 12.53 9.26
11.
87 3.04 0.57 67536 13811 108.06 22.10
ASSAM 33.89 20.49
31.
98 92.06 9.21 2045712 224744
3273.1
4 359.59
WEST BENGAL 22.52 14.66
19.
98
141.1
4 43.83 3136449 1069143
5018.3
2
1710.6
3

JHARKHAND 40.84 24.83
36.
96
104.0
9 20.24 2313135 493750
3701.0
2 790.00
ODISHA 35.69 17.29
32.
59
126.1
4 12.39 2803111 302195
4484.9
8 483.51
CHHATTISGARH 44.61 24.75
39.
93 88.90 15.22 1975484 371168
3160.7
7 593.87
MADHYA
PRADESH 35.74 21.00
31.
65
190.9
5 43.10 4243413 1051309
6789.4
6
1682.0
9
GUJARAT 21.54 10.14
16.
63 75.35 26.88 1674497 655656
2679.2
0
1049.0
5
DAMAN & DIU 0.00 12.62
9.8
6 0.00 0.26 0 6341 0.00 10.15
DADRA &
NAGARHAVELI 62.59 15.38
39.
31 1.15 0.28 25556 6829 40.89 10.93
MAHARASHTRA 24.22 9.12
17.
35
150.5
6 47.36 3345872 1155104
5353.4
0
1848.1
7
ANDHRA
PRADESH 10.96 5.81
9.2
0 38.10 8.48 846667 206829
1354.6
7 330.93
TELANGANA 10.96 5.81
9.2
0 23.65 7.90 525553 192683 840.89 308.29
KARNATAKA 24.53 15.25
20.
91 92.80 36.96 2062222 901472
3299.5
6
1442.3
6
GOA 6.81 4.09
5.0
9 0.37 0.38 8174 9322 13.08 14.92
LAKSHADWEEP 0.00 3.44
2.7
7 0.00 0.02 0 488 0.00 0.78
KERALA 9.14 4.97
7.0
5 15.48 8.46 344111 206431 550.58 330.29
TAMIL NADU 15.83 6.54
11.
28 59.23 23.40 1316291 570701
2106.0
7 913.12
PUDUCHERRY 17.06 6.30
9.6
9 0.69 0.55 15240 13431 24.38 21.49
ANDAMAN &
NICOBAR
ISLANDS 1.57 0.00
1.0
0 0.04 0.00 853 0 1.37 0.00
ALL INDIA 25.70 13.70
21.
92
2166.
58 531.25
4814632
6
1295721
9
77034.
12
20731.
55

SupplyScenario Analysis
SenarioA 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Supply(MMT)
Refineries 215.07 219.50 224.42 278.95 333.48 388.01
NewRefineries 15.00 9.00
%of LPG is extracted 4.00 4.00 5.00 5.00 6.00 6.00
fromRefineries 8.60 8.78 11.22 13.95 20.01 23.28
Fractionators 3.99 4.43 4.92 5.46 6.06 6.73
From Fractionators 2.18 2.42 2.68 2.98 3.31 3.67
Incremental domesticallocationto
fractionators 1.83
LPG imports 8.33 8.33 8.33 8.93 8.93 10.13
NewLPG importterminals(MMT) 0.60 1.20
Incremental LPGimportterminalscapacity
SenarioA 19.11 19.53 22.24 25.86 32.25 37.08
SenarioB 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Supply(MMT)
Refineries 215.07 230.07 230.07 230.07 230.07 230.07
NewRefineries 15.00
fromRefineries 8.60 9.20 10.35 10.35 10.35 10.35
Fractionators 3.99 4.43 4.92 5.46 6.06 6.73
LPG imports 8.33 8.33 8.33 8.33 8.33 8.33
NewLPG importterminals(MMT)
Incremental LPGimportterminalscapacity 8.33
Scenario B 19.11 19.95 21.37 21.67 21.99 22.36

SenarioC 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Supply(MMT)
Refineries 215.07 230.07 230.07 230.07 230.07 230.07
NewRefineries 15.00
fromRefineries 8.60 9.20 9.20 9.20 9.20 9.20
Fractionators 3.99 4.43 4.92 5.46 6.06 6.73
Incremental domesticallocationto
fractionators 1.83
LPG imports 8.33 8.33 8.33 8.33 8.33 8.33
NewLPG importterminals(MMT)
Incremental LPGimportterminalscapacity
Scenario C 19.11 19.95 11.89 20.52 20.84 21.21

10.References
 http://www.petroleum.nic.in/docs/pngstat.pdf
 http://ppac.org.in/WriteReadData/Reports/201601110249520431222DataonLPGMarketing.pdf
 http://www.wlpga.org/wp-content/uploads/2015/09/wlpga-ar2014.pdf
 http://energia.org/wp-content/uploads/2015/04/01.-WLPGA_-
_Cooking_with_LP_Gas_Report_-_FINAL__PbP.pdf
 http://indiatoday.intoday.in/story/oil-psus-to-invest-rs-1-5-lakh-crore-for-setting-up-biggest-
refinery/1/580393.html
 http://www.newsonprojects.com/sector.asp?country_code=3&industry_code=7
 http://ppac.org.in/WriteReadData/userfiles/file/IndiaRefineryMap.pdf
 http://ppac.org.in/WriteReadData/userfiles/file/IndiaRefineryMap.pdf
 http://www.mapsofindia.com/maps/sea-ports/
 http://ppac.org.in/content/147_1_ConsumptionPetroleum.aspx
 http://ppac.org.in/content/5_1_ReportStudies.aspx
 http://ppac.org.in/WriteReadData/Reports/201406070259104211804RS_3_Expert_Group_Rep
ort_Oct2013.pdf
 http://ppac.org.in/WriteReadData/Reports/201601050441524912702ReadyReckoner,Novembe
r2015.pdf
 http://www.petroleum.nic.in/pollpg.htm
 http://petroleum.nic.in/docs/Annual_Report/AR13-14.pdf
 http://www.worldenergyoutlook.org/media/weowebsite/2015/IndiaEnergyOutlook_WEO2015.
pdf
 https://www.bp.com/content/dam/bp/pdf/energy-economics/statistical-review-2015/bp-
statistical-review-of-world-energy-2015-full-report.pdf
 http://www.prsindia.org/theprsblog/?tag=tendulkar-committee
 http://timesofindia.indiatimes.com/india/New-poverty-line-Rs-32-in-villages-Rs-47-in-
cities/articleshow/37920441.cms
 http://www.dnaindia.com/india/report-planning-commission-accepts-suresh-tendulkar-s-
estimates-on-number-of-poor-1372625
 http://planningcommission.nic.in/reports/genrep/rep_hasim1701.pdf
 http://www.census2011.co.in/
 http://www.censusindia.gov.in/2011census/PCA/PCA_Highlights/pca_highlights_file/India/Chap
ter-1.pdf
 http://data.worldbank.org/indicator/IS.ROD.DNST.K2
 http://data.worldbank.org/indicator/SP.POP.GROW

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