Govt may ask all refineries to produce fixed level of LPG

Government is likely to order oil refineries, including private sector Reliance Industries and Essar Oil, to maintain a minimum level of LPG production to ensure uninterrupted supply of cooking gas to the public.

While India is surplus in petroleum products, production of LPG in the country is lower than the demand. The deficit is met through imports which have to increased if any of 20 refiners in the country produces less than projected LPG.

Sources said modern refineries have flexibility of changing product slate and often LPG production is pushed down in favour of high value petrol and diesel. Change in production profiles of refineries especially private sector units, has in the past led to LPG scarcity and the resultant delays in delivery of domestic cooking gas.

To tide over this, the Oil Ministry last month sought law ministry's opinion if the government can under the Essential Commodities Act of 1955 ask both public and private sector oil refineries to produce a certain volumes.

Sources said the Law Ministry in its opinion has stated that petroleum and petroleum products are among the essential commodities defined under the Essential Commodities Act, 1955. Section 3(1) of the Act empowerd the Union government to provide for regulating or prohibiting the production, supply and distribution of essential commodity and trade for maintaining or increasing supply of any essential  ommodity or for securing their equitable distribution and availability.

Also read: ATF price hiked by 1%, non-subsidised LPG rate cut by Rs 53

The government, the law ministry opinion said, can issue an order for LPG under Section 3(1). "In view of the above provision of the Act it appears that the Central government may by an order under the (Essential Commodities) Act mandate a minimum percentage of LPG production from all the refineries," it said.

Against a projected demand of 16.5 million tonnes, indigenous availabilty of LPG is only 10.4 million tonnes during the current fiscal. The remaining 6.5 million tonnes is being met through imports.

Sources said while petrol production by refineries has risen by a compounded annual growth rate (CAGR) of 13.9 percent in five years beginning 2007-08, CAGR in LPG production was only 1.5 percent. Diesel too has shown a CAGR of 7.2 percent.

Government has drawn an ambitious target of increasing LPG penetration in the country to 75 percent of the population by releasing 5.5 crore new connections by 2015. Focus of Vision 2015 is to extend the usage of LPG for cooking purposes in rural/under- served areas so that standard of life in rural areas improves by switching from kerosene or firewood to environmental friendly fuel, they said.

To achieve this, domestic production has to increase, they added. Presently, 16.24 crore domestic LPG connections cover about 62 percent of the population.