The government’s announcement providing LPG (liquefied petroleum gas) connections to 5 crore below poverty line households in three years may be a prudent one but the oil marketing companies say challenges are aplenty in meeting the same.
Christened Ujjwala, the scheme provides a financial support of Rs 1,600 for each LPG connection to the BPL households. The identification of eligible BPL families, as proposed in the Budget for 2016-17, will be made in consultation with the states. The scheme will free the women in rural areas from the curse of smoke while cooking. It will also reduce the time spent on cooking.
“Investments would be required on various fronts including LPG import facilities in place, logistics and additional bottling facilities. The oil marketing companies will have to make additional investments to ensure we meet the targets in three years,” said the director LPG of an oil marketing company who did not wish to be identified.
HPCL, sources said, would be spending around Rs 2,000 crore in setting up an LPG import facility (Rs 500 crore) and around 7-10 additional bottling plants with an investment of Rs 700-1,000 crore. Setting up of one bottling plant costs Rs 100-150 crore.
“An import facility is required at the east coast. If the infrastructure is well placed, investment required could be less,” said an official. HPCL, sources said is already scouting for land to build a new LPG bottling plant of 60 million tonnes per annum.
State-run Bharat Petroleum Corporation Limited (BPCL) on the other hand has plans afoot to build an LPG import terminal at West Bengal’s Haldia, with an estimated cost of Rs 800 crore.
The company has acquired 35 acres for the purpose and plans to complete the project in three years. LPG consumption in the country in the domestic segment continues to grow at seven per cent per annum, imports of LPG are increasing. Oil companies are required to make adequate infrastructure arrangements to handle the increasing growth.
“We have infrastructure in the western and southern regions but there is a problem in the eastern region. The next market for us is Bihar, North-East, Jharkhand, Eastern Uttar Pradesh and West Bengal. So our import terminal will come up at Haldia,” said a BPCL official.
The capacity of the planned terminal would be two 15,000-tonne tanks, which will be capable of handling the VLCC (very large crude carriers) vessels.
Currently, BPCL is meeting the demands with imports. “Capacity of the terminal would be two 15,000-tonne tanks, which can handle the VLCC (very large crude carriers) vessels. Necessarily we need to have one propane tank and a butane tank. We will be looking at an expansion later,” the official added.
The company expects cooking gas demand to grow 6-9% this financial year on the back of lower prices and increasing focus on rural reach.
Indian Oil Corporation (IOC), the nation’s largest oil firm, is also constructing a 0.6 million tonnes per annum LPG import facility at Paradip at a cost of Rs 690 crore to meet the cooking gas deficit in the eastern sector. The company in January 2015 decided to invest Rs 5,300 crore in setting up an LPG import facility at Paradip in Odisha and laying pipelines.
There has been a demand-supply mismatch for LPG. Last financial year, the country imported 8.33 million tonnes (mt) of LPG, while the total consumption was 18.2 mt. In the previous financial year, imports stood at 6.61 mt and the total demand at 16.29 mt.
Clarity needed on Ujjwala
Officials from the oil marketing companies said there is no clarity on the capacity of LPG cylinders that the government plans to allot to the rural areas as LPG demand is not high in rural areas.
“The consumption pattern of rural households is different from that of urban households. While rural households use only 4-5 LPG cylinders in a year, urban households use 9-12 or more,” said an official from BPCL.
Also, rural households still prefer to depend on firewood or cow dung cakes for cooking. According to a 2014 study ‘Analysing Rural Energy Transitions and Inequities’ by TERI (The Energy and Resources Institute) 91 per cent of rural households surveyed that have an LPG connection continue to use biomass alongside.
