History of LPG & Creation of Parallel Marketing System in India

Long Back in 1970, when LPG was introduced in India as cooking fuel, people were afraid of using because they felt it is dangerous. It impelled the Government to encourage distribution of this fuel through the Public Sector Oil Companies on subsidized rates to wean the public from using fire­wood, coal, charcoal and Kerosene. Today domestic cooking in India is synonymous with use of LPG. Less time spent on cooking chorus, a clean and smoke free kitchen, easy to light and extinguishes, is all qualities that endeared the fuel to the Indian Housewives and also to the bulk caterers i.e. Canteens, Hotels and Restaurants. It created a huge demand of LPG. The Oil Companies could not meet the growing demand, resulting in decade-long waiting lists and the ever-expanding subsidy obligation proved a big burden on the Government Exchequer. So, The Government took two decisions, one to Import LPG to meet the shortfall in domestic production and second to allow the private sector to handle exclusively the marketing of the imported LPG at market-oriented prices without subsidy support. Thus The Parallel Marketing Activity started in August 1993.

Problems faced by Parallel Marketer:-

Initially this Activity faced serious hardships. Some of the problems and developments were as under:-

  1. As it happens present by, the flush of short-term fortune seekers organized Marketing Companies with catchy names and titles like MODI, BAJAJ, INDIRA, DIGBOI, SURAJ etc. by giving false commitments of gas rates. They in fact did not build any infrastructure and induced the public to part with initial deposits. After collecting large amount of deposit money, they rolled down their shutters and disappeared from scene and cheated large number of people.
  1. Lack of infrastructure i.e. Port Facilities for handling & storing imported LPG.
  1. Unsteady World Market price of LPG at that time and the declining trend in the exchange value of the Indian rupee.

How the Problems were Overcome :

  1. The Govt. issued other Gazette Notification in 1995 making compulsory Rating from specified Agencies & their renewal on yearly basis. This prevents non-bonafide suppliers entering the marketing. After this order, most of the South Sea Bubble ventures faded away, leaving the field exclusively in the hands of few dedicated and committed Parallel Marketer.
  2. The problem of storage facilities was solved with availability of infrastructure with private sector/bulk importers like AEGIS & BHARAT SHELL and establishment of production unit by RELIANCE with 2.00 lacs MT annual capacity and supplying LPG to the parallel marketers as co-product.
  3. Exchange value of the Rupee stabilized in comparative terms and international supply price of LPG also reduced.

Period after Solutions of Problems why parallel marketer could not be successful(reasons for non fruitful result)

In the year 1998, The Govt. of India, opened domestic connections as well as supply of subsidized cylinder at large, which create the high differences of price between the Govt. Oil Companies and Parallel marketer. However, subsidized refill at large could not be continued for long period due to heavy burden of subsidy and Govt. ultimately banned the usage of domestic cylinder of 14.2 kg for commercial/ Industrial purpose in the year 2000. This decision of Government opened huge commercial market where parallel marketer could sell LPG at competitive price as compared to the public sector oil companies but people were not able to use commercial cylinders due to heavy rates as compared to domestic 14.2 kg cylinders which were easily available in the market by black marketers.

In 2012, Govt. of India introduced DBT (Direct Benefit Transfer) scheme i.e. give cash subsidy in customer account directly which could not be sustained due to political pressure. During this period, few persons entered in this business for making money in the name of ‘Aditya’, ‘Bharti’, ‘Parchi’ etc. with some infrastructure and give false promises that they will supply Gas at subsidized rates which were not even feasible for Govt. Oil Companies & they have to shut down their shutters. Due to such fraud companies in the market, the customers lose the faith on parallel marketers.

PRESENT FAVOURABLE SCENARIO

Now, the favorable time has come to enter in this business as well as increase the volume of business by existing Parallel Marketer which seems possible from the following actions taken by the Govt:-

  1. In 2000, after banning the use of domestic cylinder the Commercial/Industrial Gas rates are being changed every month as per international market which is also feasible for parallel marketer.
  2. W.e.f. January 2015 the Govt. implemented DBT (Direct Benefit Transfer) scheme successfully which reduced the availability of subsidized domestic cylinders in the market which were being used by commercial units.
  3. W.e.f. January 2016, the Govt. launched ‘Give Up Subsidy’ & issued instructions not to give subsidy to Higher Income group & also started increasing the subsidized rate of domestic cylinder every month.
  4. In July 2017, The Govt. implemented G.S.T levying 5% GST on domestic cylinder, thus reducing the gap of commercial & domestic cylinder rates.
  5. W.e.f  January 2018, the Govt. Oil Companies i.e. Indian Oil, Bhart Petroleum & Hindustan Petroleum have also declared that they will give discount maximum up to Rs.70/- whereas earlier they were offering Rs.250/- per cylinder on 19kg & similar in Bulk Sale.
  6. The Government of India vide Gazette notification no. 8 dated 4th Jan 2018 amended the Gas Cylinder Rules and as per amended rule, NOC for LPG Godown shall be obtained from the Local body such as Gram Panchayat or urban local body concerned. Earlier NOC was to be obtained from DM/DCP (Licensing), which was a lengthy and more time consuming process.
  7. W.e.f 25th January 2018, the Parallel Marketer will also be allowed to levy GST @ 5% as presently being levied by Govt. Oil Companies.
  8. In May 2019, the Ministry of Petroleum, Govt. of India issue memorandum to form a committee to review the working of Parallel Marketers to increase the participation of Parallel Marketers in LPG even to allow the supply of subsidized LPG domestic cylinder as per news published in leading newspapers.
  9. Recently, it is in the limelight that subsidy will be over in a short span.

Now, The gas is fully available at reasonable rates and the gap between the LPG supplied by the public sector oil companies and the parallel marketers is gradually reducing day by day and destined to come at par within short period & it is news round the corner, that subsidy will be abolished totally. As soon as the subsidy is abolished, the domestic market will also be in the hands of parallel marketer. For instance, the demand for BSNL and MTNL (public sector companies) connections has declined and has totally vanished from the market because of the strong entry of parallel marketers like Idea, Airtel, Reliance into the market. These private companies’ offer low/competitive prices, so their demand is increasing day by day and the companies are reaching heights in terms of success. 

Similarly, the parallel marketers of LPG are expanding and they will also win in the near future.

IMPORT ASPECTS OF THE BUSINESS

The vast potential in the field on account of the product being a daily necessity of mass consumption provides unlimited scope for genuinely interested person in this business. Basic features of LPG product described hereunder should attract every individual in a promising career:

  • Mass consumption product with universal demand.
  • Product of daily use and uninterrupted demand.
  • Can be started with reasonable investment.
  • Assured good return.
  • Minimum risk factor in the business.
  • Non-speculative and steady business.
  • Infinite scope for Growth.