Sell domestic LPG only to PSU oil firms: Govt to producers

New Delhi: The government has ordered LPG producers like Reliance Industries to supply all the cooking gas (LPG) they produce locally to state-owned oil companies only, and private retailers have been asked to source their requirements through imports.

The Ministry of Petroleum and Natural Gas, in an order issued this month, stated that "sale of indigenously produced LPG is not permitted to the entities other than government oil companies."

All domestically produced liquefied petroleum gas (LPG) should necessarily be sold to PSUs for subsidised sale to consumers. While India is surplus in refining capacity, it does not produce enough LPG to meet all of its demand.

It imported 8.7 million tonnes of LPG in 2015-16 and 4.66 million tonnes in first half of current fiscal. LPG is produced by both public sector firms like Indian Oil Corp Ltd (IOC) as well as private firms like Reliance Industries Ltd.

The ministry said instances have been noticed of all locally produced LPG not being sold to oil marketing companies - IOC, Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL). "...some domestic LPG is also being sold to parallel marketers in violation of Ministry's order," it said.

"All domestic producers of LPG need to ensure compliance with provisions of LPG (Regulation of Supply and Distribution) Order, 2000 and LPG (Regulation of Use of Motor Vehicles) Order, 2001 and sell domestically produced LPG only to government oil companies."

Ministry held that sale of LPG by domestic producers to anyone other than state-owned oil marketing companies (OMCs) is not permissible under LPG control order. Non-state LPG sellers, called parallel marketers, cannot source the fuel from domestic refiners. They have to import LPG if they intend to sell the cooking fuel in domestic market.

It asked all LPG producers including Oil and Natural Gas Corp (ONGC), GAIL India Ltd and RIL as well as parallel marketeers to comply with the order. RIL, the largest single location LPG producer in the country, had in 2013 contested the ministry view, saying rules do not mandate that all domestic LPG must be sold only to state firms.

However, the government's top law officer, Solicitor General of India (SGI) backed the ministry's view. The LPG control order of 2000 defines parallel marketer as someone who is carrying on business of importing, storing, transporting, marketing and distributing of LPG.

It does not prohibit the parallel marketer from producing LPG but i  cannot sell such production directly to consumers. Last year, the ministry had permitted RIL to sell up to 10,000 tonnes of LPG per month for one year to parallel LPG marketers on condition that it will import an equivalent quality and deliver to state-owned firms. There are a total of 183 parallel LPG marketers in the country.