LPG price at record high, private firms eyeing cooking gas market

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With cooking gas prices touching record highs and the government withdrawing subsidy on LPG cylinders, private players such as Reliance Gas, GoGas and Puregas, are looking to cash-in on the cooking gas market. The cooking gas segment has opened up for private companies with global LPG prices tempering and the Union government not releasing the subsidy on cylinders since May last year, according to a report in the Business Standard.

A 14.2 kg private cooking gas cylinder now costs Rs 884.50 in Delhi, while previous governments tried to keep the LPG prices under Rs 500. This hike in prices has contributed towards private players eyeing the domestic gas cylinder market.

Players such Reliance Gas, which offers domestic connections in Maharashtra, Madhya Pradesh, Gujarat and Rajasthan, could now get into domestic LPG business aggressively.

Govt vs private LPG prices

Other private players in the LPG market like Puregas, part of Aegis Logistics, are selling cooking gas at Rs 87/kg. The price per kilogram of LPG gas for Reliance Gas and GoGas is Rs 80. With LPG prices increasing to record highs, prices offered by private players are now comparable to the same of Oil Marketing Companies (OMCs). A 14.2 kg gas cylinder offered by Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) costs around Rs 891.50 or Rs 63 per kilo of LPG.

The private companies also claim that they offer faster service and fresh connections within 48 hours. Most dealers of private companies offer cylinders immediately with minimal paperwork to woo consumers, new to a city. Comparably, getting an LPG connection from a PSU can take days, if not weeks in some cases.

The private players in the LPG market are also banking on relaxations given in the Parallel Marketing System (PMS) of LPG as allowed by the Ministry of Petroleum and Natural Gas. According to CRISIL, the scope for parallel marketers in India includes importing, storing, transporting, bottling, marketing, distribution and sale – or any activity relating to the LPG business.

Reliance edge in LPG market

The LPG cylinders sold by private players cost more as they are selling imported LPG, which is subject to a 5% customs duty, an official, requesting anonymity,  from one of the private players explained. “The LPG sold by PSUs is made from crude oil that has no import duty. The private players without refineries, basically everyone except Reliance, have to either buy finished products from domestic refiners, or import them from the international market. This pushes up input costs for private companies, resulting in more expensive domestic cylinders,” the official was quoted in the media report.