INDIAN DOMESTIC GAS

INDUSTRY
ANALYSIS OF MARKET STRUCTURE
Submitted to:
Dr. Rupamanjari Sinha Ray
Professor in Microeconomics
Management Development Institute, Gurgaon

SUBMITTED BY:
GROUP-5, NMP29,
SECTION - A
Akhilesh Purohit
Arun Saraswat
Dipesh Kumar
Gagandeep Singh Kalra
Nishu Jain
Sanjay Yadav

29NMP06
29NMP15
29NMP24
29NMP27
29NMP41
29NMP50

Acknowledgement
The report is an exploratory study on the Market structure of the Domestic Gas Industry. It
consists of both qualitative as well as quantitative analyses. It includes study of market
structure, HHI values and others analysis of Indian Domestic Gas Industry.

We would like to acknowledge the support of our Microeconomics Professor, Dr.

Rupamanjari Sinha Ray, at Management Development Institute, Gurgaon. The rigorous
nature of analysis always required constant guidance and help which maam was able to
provide. We would also like to thank the faculty at MDI, for shaping our minds to deal with
much more complex subjects, without whose support, the completion of this Analysis would
not have been possible.

Group-5 (Section A)
2016
NMP-29
MDI Gurgaon

18th June

EXECUTIVE SUMMARY
The report is an exploratory study on the Market Structure of the Domestic Gas Supply
Industry in the Indian Market. It gives an insight in the history of the market, the growth
experienced over the years and the expectations for the future. It also studies the economic
benefits of a growing Domestic Gas sector in the country. The report gives an in depth
analysis of the Indian market for Domestic Gas Supply. It forecasts the growth of market in
India. Through state-wise price comparisons in the country, the report studies the major
factors that drive growth of the industry. It also shows various schemes by the government
that help in growth of this sector.

Table of Content
Contents
Acknowledgement......................................................................................................................2
EXECUTIVE SUMMARY........................................................................................................3
Market Structures.......................................................................................................................6
Perfect Competition.............................................................................................................7
Monopoly...............................................................................................................................8
Why do Monopolies arise?..............................................................................................8
Effects of Monopoly.........................................................................................................8
Monopolistic..........................................................................................................................9
Oligopoly.............................................................................................................................10
The Five Competitive Forces Model.............................................................................10
Introduction of LPG.................................................................................................................11
Natural Gas and Oil Extraction........................................................................................11
Crude Oil Refining.............................................................................................................11
Most Important Property of LPG.....................................................................................11
Sources of LPG...................................................................................................................12
Where to use LPG..............................................................................................................12
LPG In India Overview.....................................................................................................13
Demand: Past & Future.....................................................................................................13
Market Share............................................................................................................................15
Market Growth Rates........................................................................................................16
Major Players.....................................................................................................................16
Measures of Oligopoly.............................................................................................................18
Herfindahl Index (H).........................................................................................................18
Four Firm Concentration Ratios......................................................................................18
LPG Programs in INDIA..........................................................................................................19
Deepam LPG Scheme.........................................................................................................19
Rajiv Gandhi Gramin LPG Vitrak...................................................................................20
STATE/CITY WISE MONTHLY RETAIL SELLING PRICE OF LPG.................................21
PRICES OF LPG CYLINDERS.......................................................................................22

Competitive Environment........................................................................................................23
Business Rivalries...............................................................................................................23
Inter OMC competition.................................................................................................23
Threat from substitutes..................................................................................................24
Cap on LPG cylinders hikes sales of auto LPG, CNG....................................................24
Kerosene Demand to Dip on LPG use, Rural Electrification.........................................25
GOVERMENT NORMS AND REGULATIONS....................................................................27
Direct Cash Transfer via Aadhar Card............................................................................27
Rural Marketing:......................................................................................................................28
Issues....................................................................................................................................28
Challenges...........................................................................................................................28
CONCLUSION........................................................................................................................30
BIBLIOGRAPHY....................................................................................................................31

Market Structures
Type of
Market
Number of
Firms
Freedom of
Entry
Nature of
Product
Implication of
Demand
Curve faced
by firm
Examples

Perfect
Competition
Many

Monopoly

Monopolistic

Oligopoly

One

Many/ Several

Few

Unrestricted

Blocked

Unrestricted

Restricted

Identical

Unique

Differentiated

Horizontal:
Firm is Price
Taker

Firm has
considerable
control over
price
Railways

Downward
Slope, but
relatively
elastic
Restaurants

Differentiated or
Identical
Downward
Slope, relatively
Inelastic

Wheat,
Carrots

Soft Drink

Perfect Competition
Perfect competition is a market structure in which the following five criteria are met:
1) There must be many buyers and many firms, all of whom are small relative to the
market No single consumer or producer buys or sells more than a tiny fraction of the
total output. A producers market share is the fraction of the total industry output
represented by that producers output.
2) The products sold by all the firms in the market must be identical - An industry can be
perfectly competitive only if consumers regard the products of all producers as
equivalent.
3) There must be no barrier to new firms entering the market - There is free entry and
exit into and from an industry when new producers can easily enter into or leave that
industry. This ensures that the number of producers in an industry can adjust to
changing market conditions, and, that producers in an industry cannot artificially keep
other firms out.
The prices in perfectly competitive markets are determined by the interaction of demand and
supply. The actions of any single consumer or any single firm do not affect the market price.
Consumers and firms have to accept the market price if they need to buy/ sell any product in
a perfectly competitive market.

Price(P)
(Demand)
Quantity(Q)
The demand for a good or service produced in a perfectly competitive market will be
downward-sloping, but the demand curve for the output of one firm in a perfectly
competitive market will be a horizontal line at the market price. Firms in perfectly
competitive markets are price takers and will see their sales drop to zero if they attempt to
charge more than the market price.

Monopoly
A monopoly is a firm that is the only seller of a good or service that does not have a close
substitute. A narrow definition of monopoly used by some economists is that a firm has a
monopoly if it can ignore the actions of all other firms. Many economists favor a broader
definition of monopoly. Under the broader definition, a firm has a monopoly if no other firm
are selling a substitute close enough that the firms economic profits are competed away in
the long run. Compared to a competitive market, a monopoly:

Produces a smaller quantity: QM< QC

Charges higher price: PM> PC

Earns a profit.

Why do Monopolies arise?

To have a monopoly, barriers to entering the market must be so high that other firms can
enter. The main reasons for the same are:
1) Government blocks the entry of more than one firm into a market by issuing a patent.
2) One firm has control of a key raw material necessary to produce goods.
3) There are important network externalities in supplying goods.

4) Economies of scale are so large that one firm has natural monopoly.
Effects of Monopoly
1) Monopoly causes a reduction in Consumer Surplus.
2) Monopoly causes an increase in Producer Surplus.
3) Monopoly causes a deadweight loss, which represents a reduction in Economic
Efficiency.
Because monopolies reduce consumer surplus and economic efficiency, most governments
have policies that regulate their behavior. These laws make illegal any attempts to form a
monopoly or to collude.

Monopolistic
A market structure in which barriers to entry are low, and many firms compete by selling
similar, but not identical products. A monopolistic competition is a market structure in which

There are many competing producers in an industry.

Each producer sells differentiated product.

There is a free entry into and free exit from the industry in long run.

Product differentiation is the process of distinguishing a product or service from others, to

make it more attractive to a particular target market. This involves differentiating it from
competitors' products as well as a firm's own products. It plays an important role in these
kind of markets. It can be done in three ways:

Simple: based on a variety of characteristics.

Horizontal: based on a single characteristic but consumers are not clear on quality.

Vertical: based on a single characteristic and consumers are clear on its quality.

The firms can differentiate through marketing which refers to all the activities necessary for
a firm to sell a product to a consumer. They use two marketing tools to differentiate their
products:

Advertisement

Brand Management

As the term monopolistic competition suggests, this market structure combines some
features typical of monopoly with others typical of perfect competition:

Because each firm is offering a distinct product, it is in a way like a monopolist: it

faces a downward-sloping demand curve and has some market powerthe ability
within limits to determine the price of its product.

However, unlike a pure monopolist, a monopolistically competitive firm does face

competition: the amount of its product it can sell depends on the prices and products
offered by other firms in the industry.

Firms in a monopolistically competitive industry have excess capacity: they produce less
than the output at which average total cost is minimized. The higher price consumers pay
because of excess capacity is offset to some extent by the value they receive from greater
diversity. Hence, it is not clear that this is actually a source of inefficiency.

Oligopoly
A market structure in which a small number of interdependent firms compete. Barriers to
entry keep new firms from entering an industry. The three most common barriers to entry
are:

Economies of Scale

Ownership of a key input or raw material

Government barriers including patents, licensing

An oligopoly is similar to a monopoly, except that rather than one firm, two or more firms
dominate the market. There is no precise upper limit to the number of firms in an oligopoly,
but the number must be low enough that the actions of one firm significantly impact and
influence the others.

The Five Competitive Forces Model

Competition from existing firms.

Threat from new entrants.

Competition from substitute goods or services.

Bargaining power of buyers.

Bargaining power of suppliers.

Potential Entrants
Threat from new entrants

Suppliers
Bargaining power of
suppliers

Industry Competitors
Competition from existing firms

Buyers
Bargaining power of
buyers

Substitutes
Competition from substitute
goods or services

Introduction of LPG
LPG is defined as a petroleum product composed of any of the following hydrocarbon
mixtures of propane, butanes (normal butane and isobutene) and butylene. Its actually a
mixture of Butane and Propane added in a fixed ratio condensed to a liquid state at normal
temperature by application of pressure in a particular specification.

Natural Gas and Oil Extraction

When natural gas and crude oil is extracted from the earth a mixture of several different
gases and liquids are extracted. With LPG typically accounting roughly of 5%. Before
natural gas and oil can be transported or used, the gases that makes up LPG which is slightly
heavier and are separated out.

Crude Oil Refining

LPG is produced from oil at several stages including atmospheric distillation, reforming,
cracking and others. It is produced because the gases (butane and propane) are trapped
inside the crude oil.
In crude oil refining, the gases that make up LPG are the first products produced on the way
to making the heavier fuels such as diesel, jet fuel, fuel oil and gasoline. Roughly 3% of a
typical barrel of crude oil is refined into LPG, although as much as 40% of a barrel could be
converted into LPG.

Most Important Property of LPG

The most important property is that LPG products are gases at atmospheric temperatures and
pressures, but they can be liquefied and maintained in their liquid state with relative ease.
For example, propane, the hydrocarbon that comprises about 90 percent of most
commercialLPG, occupies approximately 270 times less space as a liquid than it doesas a
gas: about 270 cubic feet of propane gas are condensed into 1 cubicfoot of propane liquid (at
60 F). Butane has a slightly lower ratio, but as a liquid still occupies less than 0.5 percent of
the volume it would occupyas a gas (again, at 60 F).

Sources of LPG
These substances are generally extracted from natural gas or produced as a by-product of the
refining of crude oil. Based on feedstock, there are three types of methods to produce LPG:
1. Crude oil: At Refineries
2. Natural Gas: At Fractionators / Producers
3. Condensate received with Gas: At Fractionators / Producers
ONGC produces LPG from its fractionators at Uran, Hazira,Ankleshwar and Gandhar.

Where to use LPG

Hundreds of millions of people currently use LPG and depend on it for thousands of
applications, in commercial business, industry, transportation, farming, power generation,
cooking, heating and for recreational purposes.
Cooking
LPG being an environment friendly and clean fuel has tremendous potential as replacement
for traditional fuels like coal and firewood. On account of dearth of traditional fuels, the use
of LPG as cooking fuel has become unavoidable for people in both cities and rural areas. It
is today an ideal for modern kitchens, synonymous with safety, reliability and convenience.
Domestic Liquefied Petroleum Gas (LPG) users consume a massive 90% of the total
production of LPG in India for cooking purposes. The three PSU oil companies meet the
entire demand of the household LPG market. Indian il leads the competition with a share of

over 50% in the domestic segment currently accounting for 5.67 million tons of the 11.78
million ton per annum market.

2%
7% 2%
Domestic
Commercial
Industrial
Auto

89%

LPG In India Overview

Fourth largest consumer of LPG in the world after USA, China & Japan

Third largest consumer in domestic sector in the world after China & USA

Major market of LPG is Domestic Sector Home Delivery of 3 Million LP Gas

cylinders per day (i.e. 900 Million/ year)

Growth @ 8% p.a. in LPG Consumption in India.

Demand: Past & Future

YEAR

MnMT

2000-01

7.02

2001-02

7.73

2002-03

8.35

2003-04

9.3

2004-05

10.2

2005-06

11.2

2006-07

12.2

2007-08

13.45

2008-09

14.8

2010-11

16.35

2011-12

18.1

2012-13

19.95

2013-14

23.84

2014-15

26.06

2019-20

40.7

The presence of LPG for cooking purposes is currently limited to Tier-1, Tier-2, and Tier-3
cities, thus leaving a vast untapped market in the form of small towns and villages. The LPG
demand in the country is all set to grow at a CAGR of around 6.5% CAGR during 20122014. With the rising plunge on pollution-free environment, this sector would receive the
required thrust in near future. It is anticipated that the CNG consumption in the country will
grow at a double-digit CAGR growth during 2012-2014. However, CNG infrastructure is at
the nascent stage of development and still requires huge investments to catch-up with the
international standards. Maharashtra has the highest number of LPG customers in the
country followed by Andhra Pradesh and Tamil Nadu. It is expected that the rising
awareness about fuel qualities and gas companies, expansion strategies along with the
supportive government initiatives will further boost the growth of LPG consumers in the
country, especially in the rural areas. Rapid surge in LPG demand and continuously
increasing number of LPG running vehicles have encouraged the government to import LPG
from international markets, particularly from the Middle-Eastern countries.

The LPG being distributed is in 4 cylinder sizes. Domestic Cylinder 5kgand 14.2 kg,
Commercial Cylinder 19kg and Industrial Cylinder 35kg. LPG Domestic customer is
supplied at a subsidized rate and for industrial and commercial rate is market determined.
This difference in pricing scheme often lead to black marketing but companies are now a
days vigilant enough to inhibit this practice. HPCL as a pioneer is including GPS device in
its cylinders to restrain the fraudulent practice.

Market Share
Segment

Share %

Domestic

86

Industrial

10

Other bulk

Share %
10 4
86
Domestic

Industrial

Other bulk

Sector

Share %

Public

96

Private

Share %
4
96
Public

Private

Region
North

30

West

34

East

12

South

24

Share %

24

Share %

30

12
34

North

West

East

South

Market Growth Rates

1990-91-1996-97

5.30%

1996-97-2001-02

18.60%

2001-02-2006-07

9.60%

2006-07-2011-12

10.30%

2011-12-2019-20

9.30%

Major Players
There are various companies in India which are in the business of manufacturing the LPG gas
in India. Most of the companies are under the government authority while some of them are
private organizations also. The several LPG manufacturing companies are as follows:
Bharat Petroleum Corporation Limited: it is mainly known as the BPCL. The company is
very large and mainly a state owned company which is having its headquarters at the
Mumbai. The company deals in lubricants, fuels and mainly the LPG gases. They are in the
field of the manufacturing LPG gases from very long time and have listed themselves in the
fortune 500 lists.
GAIL (India) Ltd.: it is a PSU which can be called as the public sector undertaking that is
the government owned organization which is headed by the government that is they have
51%of the share of the firm. The GAIL is having its central office at New Delhi. They have
gas transmission networks and the gas transferring pipelines which has obtained a very good
response in the market due to their very efficient work.
Hindustan Petroleum Corporation Limited: it is mainly known as the HPCL all over the
world. The company is a state owned organization which is mainly involved in the oil
refinery mainly LPG gases.

Indian Oil: it is also known as the Indian oil corporation which the most famous of all the
oil manufacturing organizations in India. The Indian oil is that much largest company in the

India which is having 10 out of 18 oil refineries in India. It is having its head office at Delhi.
The company is the largest in terms of the sales among all the companies in India.
ONGC: the ONGC here stands for the oil and natural gas corporation limited. The company
is also a PSU which is headed by the state and having its head office in the Dehradun. The
company is involved in
exploration

and

Company

the

the

Share (%)

production,

refining of the oils and

the gases in India. The

IOC

38

gases here stand for the

LPG gas mainly which is

HPC

17

very highly used in India

GAIL

13

ONGC

12

BPC

12

as cooking gas. It is the

agency in India.

Others

Share (%)

8
12
38
12
13

17

IOC

HPC

GAIL

ONGC

BPC

Others

second

largest

gas

Measures of Oligopoly
Herfindahl Index (H): The Herfindahl index (also known as Herfindahl
Hirschman Index, or HHI) is a measure of the size of firms in relation to the industry and an
indicator of the amount of competition among them.It is defined as the sum of the squares of
the market shares of the firms within the industry (sometimes limited to the 50 largest
firms),where the market shares are expressed as fractions. The result is proportional to the
average market share, weighted by market share. As such, it can range from 0 to 1.0, moving
from a huge number of very small firms to a single monopolistic producer. Increases in the
Herfindahl index generally indicate a decrease in competition and an increase of market
power, whereas decreases indicate the opposite. Alternatively, if whole percentages are used,
the index ranges from 0 to 10,000 "points".
H = Sum of the squared market shares of all firms in an industry
Hi = 382 + 172 + 132 + 122 + 122 +82
Hi = 2254
Since HH index 2000 it is an oligopoly market structure.

Four Firm Concentration Ratios: The four-firm concentration ratio is

calculated based on the market shares of the largest firms in the industry. A four-firm
concentration ratio over 90 (that is, 90 percent of industry output is produced by the four
largest firms) is a good indication of oligopoly and that these four firms have significant
market control.Concentration ratios, especially the four-firm concentration ratio, are

designed to measure industry concentration, and by inference the degree of market control.
While there are no "absolutes" when it comes to evaluating concentration, common levels
and corresponding four-firm concentration ratios are presented in the exhibit to the right.
CR4 = 38 + 17 + 13 + 12
CR4 = 80
Since CR4 = 80, it shows an oligopoly market structure.

LPG Programs in INDIA

Government plays an important role to make sure the LPG reaches to all people of the
country at a subsidized rate.

Deepam LPG Scheme

An important scheme implemented for the expansion of domestic LPG use has been the
DeepamLPG scheme in the state of Andhra Pradesh. This project was launched on the 9 thjuly
1999 for the distribution of domestic connections to women of below the poverty line (BPL)
41 families in the rural areas of the state. Each connection was accompanied by a one-off
subsidy to the extent of the initial cost, to overcome the barrier to fuel switching. It was
meant to reduce dependence on firewood, reduce the drudgery of collection of/cooking on
firewood,reduce pollution and improve the health of women. Salient features of this scheme
are:

The scheme was administered by the state government Departments of rural

Development and Civil Supplies and distributed through OMCs.

The High Court directed that the scheme be confined only to white cardholders (i.e.
those below Rs 11,000/year/family).

The Department of Rural Development identified the beneficiaries; a target of 1.154

million spread over 22 districts was indicated. Later, the numbers were increased so
that by 2002 about 1.724 beneficiaries (including some of the urban poor) were listed.

The lists were given to the LPG dealers of the oil companies, who were also expected
to ensure training of the allotted in the use of LPG stoves.

The Department of civil supplies provided a one-time deposit of Rs 1,000/connection

towards the cylinder and regulator

Results in terms of the number of connections allotted: till March 2002,88% of the
urban target and 91% of the rural target had been met (NIRD,2002)

Government is paying the security deposit of Public Sector Oil Companies viz., Hindustan
Petroleum Corporation (HPC), Bharat Petroleum Corporation (BPC) and Indian Oil
Corporation (IOC) for release of LPG connection on behalf of the beneficiaries selected
under this scheme.

Rajiv Gandhi Gramin LPG Vitrak

Ministry of Petroleum and Natural Gas formulated a scheme,namely, Rajiv Gandhi Gramin
LPG VitrakYojna in 2009to cover more households in rural areas. This envisages the
increase in LPG population coverage from 50% to almost 75% by 2015. The scheme is
primarily to reach LPG in villages, so that dependence on conventional fuels like wood,
coaletc. is reduced. This will not only help in conservation of forests but will also have
positive impact on environment as well as on the health of our rural womenfolk,
This Scheme would be implemented by the oil marketing companies (OMCs)namely Indian
Oil Corporation Limited (IOC), Bharat Petroleum Corporation Limited (BPCL) and
Hindustan Petroleum Corporation Limited (HPCL) in addition to their Marketing Plan for
setting up regular LPG distributorships. Identification of location would be finalized by the
OMCs based on the present penetration/coverage, minimum refill/sale potential for
sustaining the RGGLV.
According to the program, the program will be sustainable for cluster of villages having
about 4000 families and consumption of 7kg per month,out of which half may go for LPG.
Contrary to 2500 cylinders, GLV will be set up with the potential of 1000 cylinders. The net
income for the proprietor expected is Rs 7664/- per month. The selection of the candidate
will be done by draw system. RGGLV will be setup by OMC who have its bottling plant
nearest to the identified cluster of villages.

This scheme is however halted by current government stating that 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.

STATE/CITY WISE MONTHLY RETAIL SELLING PRICE OF LPG

Selected State/City-wise Monthly Retail Selling Price of
Domestic LPG (14.2 Kg.) in India
(2016-2017-upto May 2016)
(Rs./Cylinder)
As on 1st
States/UTs

City
Apr.

May

Current
Prices

Maharashtra

Mumbai

518.00

535.00

535.00

NCT of Delhi

Delhi

509.50

527.50

527.50

Tamil Nadu

Chennai

521.00

538.00

538.00

West Bengal

Kolkata

536.50

554.50

554.50

Madhya Pradesh

Bhopal

556.00

575.50

575.50

Guajrat

Gandhinagar

518.50

544.50

544.50

Goa

Panjim

520.00

538.50

538.50

Chhattisgarh

Raipur

578.00

596.00

596.00

Gujrat

Ahmedabad

501.00

519.50

519.50

Maharashtra

Pune

533.00

550.00

550.00

Dadra & Nagar Haveli

Silvasa

530.50

550.00

550.00

Daman & Diu

Daman

524.00

543.50

543.50

Haryana

Ambala

531.00

549.00

549.00

Chandigarh

Chandigarh

530.50

549.00

549.00

Uttarakhand

Dehradun

548.50

568.00

568.00

Rajasthan

Jaipur

498.00

516.50

516.50

Jammu (W)

561.50

580.00

580.00

Srinagar (S)

616.50

635.50

635.50

Uttar Pradesh

Lucknow

545.50

564.50

564.50

Himachal Pradesh

Shimla

566.00

585.50

585.50

Punjab

Jalandhar

558.00

577.50

577.50

Karnataka

Bengaluru

518.50

535.50

535.50

Telangana

Hyderabad

573.50

592.50

592.50

Andhra Pradesh

Vizag

540.50

559.50

559.50

Kerala

Thiruvananthapuram

529.50

548.00

548.00

Puducherry

Puducherry

521.00

539.50

539.50

Odisha

Bhubaneshwar

543.00

561.00

561.00

Jharkhand

Ranchi

581.50

600.00

600.00

Bihar

Patna

606.00

625.50

625.50

Assam

Guwahati

562.00

589.00

589.00

Nagaland

Kohima

560.00

579.50

579.50

Jammu & Kashmir

Source: Ministry of Petroleum & Natural Gas, Govt. of India.

PRICES OF LPG CYLINDERS

Subsidized Prices of LPG in
Companies

Delhi (Rs./14.2 kg cylinder)

Indane

419.18

Bharatgas

419.15

HP Gas

419

Competitive Environment
Business Rivalries
There are mainly two categories of competitions existing in Indian LPG industry. They are
as follows:
Inter OMC competition
Threat from substitutes
Inter OMC competition
OMCs is Indian is seen as the facilitator to the nations development. Hence, apart from
churning profit for sustainable existence and growth, it has to operate in accordance with the
nations interest. Thats why OMCs are regulated such that to avoid unwanted friction
among themselves and concentrate their whole energy to nations cause. So, there exists a
special type of competition among the OMCs of India.
In domestic segment, OMC has to sell its product at a price decided by the government. So,
there exists no scope of price war, which leaves the OMCs to compete on market share. But,
to avoid unwanted friction and hence deadweight loss to the society, the regulatory body,
MOPMG tries to maintain the optimum number of dealers in an area. In order to that the
number of dealerships of a company is decided by the committee in accordance to their
market share and presence in the region. Hence, chances of competition for market share in
domestic segment are also very limited.
Though, in industrial segment, with lack of price regulation and better scope for margin
there is an intense competition in the form of:
Price
Service
Promptness in delivery
Hours of catering or working hours

Threat from substitutes

Today, PNG is considered to be most eligible fuel to replace LPG. Few, properties of PNG
which are regarded as giving it an edge over LPG are follows:
Ours PNG is Convenient
24 hours uninterrupted gas supply
No changing or handling of gas cylinders
No more last minute emergency
Make payments after you consume, through banks, drop boxes, ECS, Netetc.
PNG is economical, works out to be up to 10% cheaper than LPG
PNG is clean
Being a gaseous fuel, very clean compared to any other fuel with more than 94%
Combustible particles
Burns with a flame always hence, no blackening of vessels.
Most preferred fuel in vehicles in Mumbai today.
Contribution for a cleaner society.
PNG is versatile
Apart from cooking other appliances like geyser, air conditioner, vehicles etc. can be
used on Natural Gas However, please do not attempt to alter/modify the existing
installation yourself or through any unauthorized person.

Cap on LPG cylinders hikes sales of auto LPG, CNG

The cap on subsidized LPG cylinders has led to an increase in demand for auto LPG and
CNG, with both fuels showing a 10-20% increase in sales after September, when the cap
was imposed. Oil company officials said that the cap has checked the dangerous and illegal
practice of diversion of domestic LPG cylinders to non-cooking use such as in automobiles.
Auto LPG is a clean, high octane and eco-friendly fuel. The use of LPG as an automotive
fuel became legal in India in 2000. However, it is to be used within the prescribed safety
norms and conditions. Officials in oil marketing companies said that, before the cap came
into force, many would use domestic LPG cylinders to refill their vehicles, which is illegal.
It is risky and there are chances of leakage. However, people would do it as domestic LPG
cylinders were freely available and were cheaper than auto LPG. The per kg cost of using a
subsidized domestic LPG cylinder was approximately Rs 20, while that of auto LPG was Rs
50.
The CNG sales have also witnessed a 15-20% increase in January this year, The increase can
be attributed to people switching to CNG due to rise in price of diesel in January and to
some extent, the cap on subsidized LPG cylinders.

Kerosene Demand to Dip on LPG use, Rural Electrification

Indias petroleum ministry is expecting kerosene demand to drop 18% by March 2017 as
more households shift to gas for cooking and electricity for lighting with more rural areas
gaining access to power.
Demand is projected to fall to 6.75 million tons per annum (mtpa) in 2016-17 from 8.28
mtpa now.
The demand for kerosene is increasingly coming down due to higher penetration of LPG
(Liquefied petroleum gas) cylinders and people in rural areas getting electricity connections
under RGGVY (Rajiv Gandhi GrameenVidyutikaranYojana).
RGGVY is part of Indias Bharat Nirman project to develop rural infrastructure and aimed at
providing electricity to villages and connecting poor households across the country.
Diesel demand is projected to grow to 81 mtpa by 2017 from 63 mtpa.

This assumes significance as the government-owned oil marketers such as Indian Oil Corp.
Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd posted losses of
Rs.29,262 crore on account of selling kerosene at below-market prices.
As much as 35% of kerosene channeled through the public distribution system (PDS) is
diverted, according to a study by the National Council of Applied Economic Research
commissioned by the oil ministry. Of this, 18% is used to adulterate diesel.
The total loss from selling fuels below cost last fiscal was Rs.1.44 trillion, of which
Rs.80,935crore was due to diesel. The state-owned retailers are compensated by the
government for selling diesel, kerosene and cooking gas at fixed prices that are significantly
lower than the cost of production.
India subsidizes the prices of most fuels and its annual subsidy bill towards this is expected
to be Rs.1.67 trillion this year. Indias oil import bill increased from Rs.4.09 trillion in 200910 to Rs.7.26 trillion in 2011-12.
According to the 12th five-year Plan paper on energy, a key reform in the petroleum sector
involves kerosene supplies to be progressively reduced considering improved electricity
access provided under RGGVY and LPG connections provided in rural areas.
The total amount of kerosene consumed through PDS was 8.92 million tonnes (mt) in 201415, according to the oil ministry. There are 140 million LPG connections in the country, of
which 99.57% are for domestic use, comprising 14.2kg LPG cylinders, according to official
data.
The LPG customer population covers around 56% of the countrys total.
The government recently raised diesel prices and curbed the supply of subsidized cooking
gas to six cylinders per household per year to pare its subsidy bill.

GOVERMENT NORMS AND REGULATIONS

Direct Cash Transfer via Aadhar Card
Direct cash transfer has been introduced by government of India and it has been
incorporated in India from 1stjan 2013 via this scheme the subsidy amount will be directly go
into the account of beneficiaries. LPG for Domestic Cooking is heavily subsidized. In order
to restrict the use of subsidized LPG only for genuine domestic customers, every household
is permitted for only one registered LPG connection in the name of one of the family
members. However every registered customer is entitled to receive refills as per their
domestic cooking need.

Rural Marketing
Issues:

Economic condition and literacy levels is lower

Cooking habits, closed kitchens, smoke

Easy availability of cheaper alternate fuels

Logistic constraints poor connectivity

Additional transportation costs distances

Challenges:

Most rural households use firewood

Availability of other alternate fuels for cooking

People not fully aware of the impact of pollution from traditional fuels

Distribution cost are higher as rural households are scattered.

Consumption(%)

Kerosene; 12% Others; 2%

LPG; 18%
Woodcrop; 60%
Dung; 8%

Source: www.ruralelec.org

LPG rural marketing is a package of:

Creating LPG awareness- lack of knowledge about product, its application and safe
handling

Overcoming psychological barriers- fear of accident, misconception of taste and

quality of food cooked on LPG

Promoting own brand

Developing bottling facilities

Creating cost effective distribution channel- high cost of distribution network in rural
markets hinders growth

Enrolling households through micro finance- cooperative banks and Grameen Seva
Sehkari Mandalis

Educating households

Providing timely supplies- same day delivery

CONCLUSION
As we have seen the market of domestic gas supply in India, it acts as a typical oligopoly.
We have few players in the market selling their product(domestic gas cylinder) at different
prices which are equivalent to other player's price. The application of various measurement
indicators such as Herfindahl Index and Four Firm Concentration Ratios shows the domestic
gas supply market shows a typical oligopoly market structure. The Ministry of Petroleum

and Natural Gas looks after this sector. The study shows that demand of domestic gas is
increasing every year and government is playing an active role to effectively meet this
demand. With policies like Deepam LPG Scheme, Rajiv Gandhi Gramin LPG Vitrak,
government is making sure the supply reaches to even the rural and bpl segment of the
country. There are strict measures taken by the government by issuing Guidelines for
selection of Regular LPG Distributorship and Refill Ceiling and restructuring of LPG
distributorships in order to stop any sort of cartel formation in the market.
The domestic as well as industrial uses of LPG are on the rise and hence the LPG imports
are also seen to be increasing, in order to meet the demands. Many fuel and power
companies are also set to increase their infrastructure as well as supply with respect to LPG.
GAIL and Indian Oil are just the few apart from ONGC. But yes, again and again, the point
worth remembering is that LPG is also a non-renewable source of energy and hence proper
care should be taken not to misuse it.
Domestic as well as commercial connections for LPG are also seen increasing with each
passing year. Yet, there has also been a steady rise in the LPG prices since the demand and
popularity of this clean fuel has also increased manifold.

BIBLIOGRAPHY
1) www.indiastat.com
2) www.petroleum.nic.in
3) Ministry of Oil and Natural Gas

4) http://www.financialexpress.com/article/economy/lpg-subsidy-fixed-atr568-price-to-change-after-march/7233/

5) http://timesofindia.indiatimes.com/business/india-business/ONGC-GAILroped-in-to-sell-LPG/articleshow/958971.cms

6) http://ebharatgas.com/ebharat/
7) https://www.indane.co.in/
8) http://www.hindustanpetroleum.com/LPGHome
9) Microeconomics by Glenn Hubbard