• As LPG demand balloons, India to become more reliant on imports

    A raft of government initiatives has propelled India’s insatiable appetite for LPG to record highs, leading analysts to believe that growth is expected to hover close to double digit levels in the near to medium term as New Delhi intensifies its push towards cleaner fuels. But with LPG domestic demand growing at a much faster rate than output, the country, where refiners find it more profitable to focus on middle distillates rather than boosting LPG output, will be increasingly dependent on imports to meet its incremental consumption growth, analysts added.

    LPG demand in March hit a record high of 1.835 million mt, up 14.16% year on year, taking the cumulative demand in January-March 2016 to 5.254 million mt, up 11.28% year on year, data from India’s Petroleum Planning and Analysis Cell showed. Top officials of Indian oil companies and independent analysts recently told Platts that even though demand growth is unlikely to hold at those lofty levels, LPG demand will continue to grow around 7%-9% over the coming years.

    “Lower prices and various affirmative government initiatives will support India’s robust LPG demand growth in the medium term,” said Sri Paravaikkarasu, Senior Consultant and Asia Downstream Specialist at Facts Global Energy. Paravaikkarasu said around 2.1 million new LPG connections were added across the country in March, which contributed to the surge in demand. In addition non-subsidized LPG consumption grew by 35% year on year in March. “We expect demand growth to remain strong in the coming quarters, albeit at slightly reduced levels than that seen in recent months,” Paravaikkarasu said.

    PPAC said that LPG demand from India’s auto sector grew 3.3% year on year n March, while cumulative growth was 4.3% over fiscal year 2015-2016 (April-March). “Even commercial LPG is now substantially cheaper than gasoline/diesel due to the multiple hikes in excise duties on these liquid fuels. This makes LPG attractive for auto LPG usage too,” Macquarie said in a research study on India’s oil sector. India’s LPG demand rose 8.6% year on year to 19.55 million mt in fiscal year 2015-2016, while the country imported 8.88 million mt of LPG over the period to meet its domestic needs.

    Industry sources have said that India’s LPG imports could surge in fiscal year 2016-2017, prompting the country to compete with Japan and China for the title of Asia’s biggest importer. “India’s LPG imports will keep rising,” said Paravaikkarasu. “Other than the recent Paradip refinery, we are not going to see any other grassroot additions in the near future. This will restrict growth in domestic supplies.” Paravaikkarasu said she expects India’s LPG imports to rise 30,000 b/d year on year during fiscal year 2016-2017.

    Expanding The Reach

    The BJP-led government, since coming to power in 2014, has undertaken a series of initiatives to help boost LPG penetration across the country. In its push towards making 2016 the “year of LPG consumers,” the Indian government has set an ambitious target of opening 10,000 new LPG dealerships across the country this year, in addition to the 16,000 that already exist. It has urged the more affluent class of society to give up their subsidized LPG connections. Around 10 million consumers have given up their LPG subsidies already. The growth in March meant that LPG consumption has recorded positive growth over 31 months in a row. Jordan Oesterle Womens Jersey

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