Oil India wants to start selling LPG to customers

Vol 9, PW 17 (01 Dec 05) Midstream & Downstream

Oil India, the countrys junior state-owned explorer, is asking for government permission to begin selling LPG on the open market.

In a letter dated 7th November, Oil India chairman and managing director RK Dutta asks oil secretary Sushil Tripathi to accelerate moves to allow Oil India to sell LPG in line with permission already granted to ONGC and GAIL. Oil India produces approximately 50,000 tonnes of LPG per annum from its LPG plant at Duliajan in Assam and is surprisingly the only upstream company with its own bottling plant.

Moves are afoot to increase its LPG production and the company wants to initially focus on markets in northeast and eastern India. In his letter, Dutta reassures the government that its ambition to sell LPG freely will not distort the demand-supply balance because Oil India - together with ONGC and GAIL - produce only 15% of the total LPG production in India.

However, he said that if the government decides to impose restrictions on the direct sale of LPG by the three companies, it should allow them to sell at least 50% of their production for an initial period of two years. Dutta also asks for a number of concessions to existing guidelines.

For example, he says Oil India, ONGC and GAIL are constantly trying to increase production but that the government should not ask them to make a, specific commitment on quantum of increase at this stage. He also wants the government to extend the same subsidy on LPG sales enjoyed by Indian Oil, Bharat Petroleum and Hindustan Petroleum to Oil India, ONGC and GAIL.

Currently, exploration companies share one third of the revenue loss of oil marketing companies when they sell subsidised oil products like LPG and kerosene at low prices. Finally, Dutta believes Oil India should be allowed a free hand to sell LPG to all three segments: domestic (households), commercial (restaurants, shops) and industrial (factories) customers and in bulk or in cylinder form.