Indian Oil, HP, Bharat Petroleum to spend Rs20,000 crore on LPG business
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State-run oil refiners plan to invest Rs20,000 crore by 2020 to meet rising demand for cooking gas, two officials from the companies said.
The investments by Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) will go into setting up terminals to import liquified petroleum gas (LPG), laying pipelines, and building LPG bottling plants.
“Together, three of us would be investing over Rs20,000 crore over the next two-three years. We are jointly setting up an LPG pipeline which is going to cost us Rs10,000 crore. Our import terminals will cost us Rs5,000 crore and another Rs5,000 crore would go in setting up and expanding LPG bottling plants,” said a senior official from the LPG division of one of the companies on condition of anonymity as he is not allowed to speak to reporters.
The companies did not respond to e-mails sent on 28 April seeking comment.
The three oil companies are building a 2,600-km pipeline to service central India. It would connect Kandla or Mundra port in Gujarat to Gorakhpur in Uttar Pradesh, through Bhopal, Kanpur and Lucknow. IOCL will invest Rs5,000 crore while the two others will invest Rs2,500 crore, each.
The expansion in LPG infrastructure is prompted by a consumption surge, aided largely by the Pradhan Mantri Ujjwala Yojana cooking gas distribution program launched last May for poor households.
“At least for the next four to five years, we see LPG demand at around 10-12%, led by population growth and increased energy consumption due to improving purchasing power of households. The payback for these investments should be in around eight to 10 years,” said the second OMC (Oil Marketing Companies) official cited above.
The OMCs are planning to add a large number of liquefied petroleum gas (LPG) bottling plants to meet the rising demand for the clean cooking fuel, Mint reported on 25 April. The oil companies are adding 47 gas bottling plants over the next two years, adding to the existing 189 units.
BPCL is planning to build a 2-million tonne per annum LPG import terminal on the Gujarat coast. The terminal will be set up at a cost of Rs1,000 crore.
IOCL, along with BPCL, is expanding its LPG production facilities in Kerala and Tamil Nadu. It is also constructing an LPG terminal with a capacity of 600,000 tonnes per year at Puthuvypeen special economic zone, Kochi. IOCL is also constructing an LPG import terminal at Paradip, Odisha.
“We are both working on the project which will cost us around Rs3,000 crore. IOCL’s terminal will be linked to the 498km pipeline jointly implemented by IOC and Bharat BPCL,” said the first official cited above.
HPCL, on the other hand, is setting up a 250 trillion metric tonnes per annum capacity bottling plant at Panagarh in West Bengal. The plant will cost Rs200 crore in the first phase.
The Pradhan Mantri Ujjwala Yojana scheme has covered over 20 million households in its first year. It provides financial support of Rs1,600 for each cooking gas connection to eligible households. The connections are given in the name of the women heads of households. The government also provides an equated monthly instalment facility for meeting the cost of stove and refills.
According to data from the petroleum planning and analysis cell (PPAC), India consumed 21.55 million tonnes of LPG in the year ended 31 March, registering a 9.8% growth from the previous year. Demand may hit 35 million tonnes by 2031-32, oil minister Dharmendra Pradhan had said last month. India imported 23% more LPG during the financial year up to 11 million tonnes, as per PPAC data.