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Rural Lpg Marketing in India

In: Business and Management

Submitted By sudiptm19689
Words 2402
Pages 10
Rural LPG Marketing
Presentation by Ashok Sen General Manager(LPG-Sales) Indianoil Corporation Limited India

Agenda
• Overview- LPG Marking in India • New Initiatives

• Supply and Demand
• Conclusion

Various Products Marketed in LPG
• Domestic LPG – Packed product in 14.2Kg, & 5kg cylinders, home delivered through distributors Non Domestic LPG – Packed product 19Kg and 47.5 kg delivered supply through distributors. Bulk – Delivered to Storage Tanks of Customers – Business Associates to garner Customers Auto LPG – Through Retail Outlets along with MS/Diesel and/or stand alone outlets

Share of Products(%)



407.6 6.4%

117.3 82.7 1.9% 1.3%



Segments
5719.8 90.4%



Dom.

NDNE

Bulk

Auto

Domestic LPG Business Overview
• Total Customer Strength : 142 Million (IOC- 69.7 Million) • Average Enrolment last 3 Years : 10.4 Million (IOC- 4.9 Million) • Daily Bottling Source (Refineries/Import) 185 Bottling Plants (IOC 90) 11860 Distributors (IOC 6110) 142 Million Customers (IOC 69.7 Million)
HPC 25%

: 3.3 Million (IOC- 1.6 Million)
HPC 26%

Industry Share Customer Population

IOC 49%

BPC 25%

Industry Share Distributors

IOC 52%

BPC 23%

India- Unity in Diversity
• • • • Current population 1.2 billion. 246.7 million Households >30 lakh cyl a day Environment movement on the rise.
– Strict Guidelines by Government. – Shift to efficiency and concern for Environment

• For better logistics by packaging near to market, bottling plants even at remotest corners– At Leh - highest altitude, – At Andamans -the island situated in Bay of Bengal.

LPG Marketing Overview
Consumption Growth - LPG – There is steady growth in LPG consumption in the last 5 years.
LPG Sales (TMT) & Growth over LY
16000 15000 14000 13000 12000 11,773 12,739
(8.2%)

14,938
(7.4%)

13,912
(9.2%)

11,330
11000 10000
2006-07 2007-08

(3.9%)

10,526
(5.7%)

(7.6%)

2008-09

2009-10

2010-11

2011-12

• Current Year Growth till.Aug’12 is more than 6.9% over last year for same period

LPG Marketing Overview
Trend of Subsidized and Non-subsidized LPG Sales

Year 2005-06 2006-07 2007-08

Subsidized 95 % 93 % 91%

Non-Subsidized 5% 7% 9%

2008-09
2009-10 2010-11 2011-12

90%
89% 89% 89%

10%
11% 11% 11%
8

New Initiatives Vision 2015

Vision 2015
Clean Energy Improve Customer Service

Improve Affordability

Improve Reach Reduce Subsidy Leakage Improve Coverage

Vision 2015
To extend the usage of LPG for cooking purposes in rural / under-served areas so that standard of life in rural areas improves and the women folk in the backward / under-developed areas of the country can reap the benefits of cooking on LPG stoves rather than use kerosene/fire-wood. This shift from kerosene/fire-wood in rural India will also result in environment protection / reduction in cutting down of trees in forest areas for use as firewood

Vision 2015


• • • •

All Blocks in the country to have minimum one LPG distributor All districts - minimum 50% coverage All States - minimum 60% coverage All India - minimum 75% coverage Release 5.5 crore new LPG connections

To fulfill the vision • New scheme - Rajiv Gandhi Gramin LPG Vitarak Yojana (RGGLVY)has been launched to reach India in villages. • Release LPG connection to BPL families predominantly in rural India.

Challenges in Expanding Use of LPG
•Ensuring reliable supply– • Additional LPG production capacity and Import Facilities • Development of adequate transportation (pipelines and rail-tank-wagons • Storage installations. •Ensuring accessibility – • Reliable distribution system even in rural areas •Increasing affordability – • Reduce initial costs of connection, equipments and LPG • Reduce regular cost of refill

Issues Related to Rural Marketing
• • • • Affordability Customer Education Penetration Other Cheaper Fuels
– Biomass, Firewood

• Availability of Kerosene

Affordability
• Cost of accessibility
– Cost of Hotplate Rs 800 – Security Deposit of Cylinder Rs 1250 – Security Deposit of Regulator Rs 150 – Cost of Accessories and Connection Rs 200 – Cost of First Refill Rs 400 Total Cost for SBC Rs 2800 – Security Deposit of Second Cylinder Rs 1250 – Cost of refill Rs 400 Total Cost of DBC Rs 4450

Access Subsidisation BPL through CSR
• CSR Fund of ONGC, OIL, GAIL, BPC, HPC and IOC.

• Security deposit for the cylinder (Rs.1250/-) and Pressure Regulator (Rs.150/-) is paid from the fund • Connection is released only to BPL card holders only
– Local administration to authenticate on BPL status

• Total 88945 no of connections released to BPL families • 12.45 Crores spent under this scheme

Access Subsidisation BPL – State Governments
• State Governments launched various Scheme • Mostly for BPL families • Subsidisation not only for Cylinder deposits but even for Hot plates and accessories • Undertaken by different State Governments – Partial/full Financial assistance is provided to the BPL families/others by the respective State Governments • Total 71,21,068 no of connections released to BPL families under various schemes of State Governments by PSU Oil Marketing Companies till June’12

Access Subsidisation by State Governments
State Name of Scheme Beneficiary Assistance by State Government

Commenced in SD : one 14.2 kg cyl & 1999. BPL Pressure Regulator. families.. Chhattisgarh Grihalaxmi SC/ST families SD: two 5 kg cyls & Yojana in rural area. regulator Cost of refills , Cost of rubber tube and hotplate. Goa Families SD one 14.2 kg cyl and Identified by Regulator , State Govt. Cost of rubber tube and hotplate

Andhra Pradesh

Deepam

Details of Schemes of State Governments
State Gujarat Details of Scheme Vanabandhu Beneficiary Assistance by State Government

Jharkand

Madhya Pradesh

Connection is Rs. 2200/- toward released only to ST release of connection. applicants to protect forest area Antyodaya BPL families SD: 5 kg cylinder, Scheme pressure regulator & cost of 1st refill of one 5 kg cyl. Cost of single burner hotplate, rubber tube Mukhyamantri Connection is SD & cost of refill of one Kanyadan released to girl of 14.2 kg cyl, cost of rubber Yijana BPL family getting tube and hotplate. married

Access Subsidisation by State Governments
State Name of Scheme Beneficiary Assistance by State Government

Maharashtra

Tamil Nadu

Connection is SD & cost of refill of one Tribal released to BPL 14.2 kg cyl Beneficiaries' families . cost of rubber tube and Scheme of Govt. hotplate. of Maharashtra) SD one 14.2 kg cyl & Tamil Nadu Govt. Announced in Jan'07. regulator, Free LPG Connection is cost of rubber tube and connection to released to BPL hotplate,. BPL families families . SD Free connection to Women of Village area Connection is released to women of BPL families. SD & cost of refill of one 14.2 kg cyl , cost of double burner hotplate, Suraksha LPG Hose & DGCC Book.

Uttaranchal

Access Subsidisation by State Governments
State
Assam

Name of Scheme
Randhan Jyoti

Beneficiary

Assistance by State Government

Announced on SD : one 14.2 kg cyl & Pressure 15.08.2003. Connection Regulator, to beneficiaries Cost of hot plate & rubber tube, identified by the State cost of DGCC & initial refill. Govt. Mizoram Forest Scheme Announced in '2003. SD :one 14.2 kg cyl & Pressure Connection to Regulator, Beneficiaries identified cost of hot plate & rubber tube, by the SG. Discontinued cost of DGCC & initial refill. since 2007 Sikkim Announced in '02-'03. SD & Cost of refill of two 14.2 Janta Mela Connection is released kg cyl & regulator, cost of to BPL families rubber tube, hot plate,DGCC Book, administrative charges Pondich- Government Announced in '2008-09. . SD two 5 kg cyls. or one 14.2 erry Connection is released kg cyls & regulator, Free LPG to BPL families cost of rubber tube and connection hotplate,

Release of Connections
• To enroll total of 55 m new LPG connections between 2010-2015


– • • •

10million every year
Mostly in Rural areas Through existing distributors and Small Format Distributors Conversion of Kerosene/biomass customers Released 8.6 m in 2009-10, 10.4 m in 2010-11 and 12.3 m in 2011-12.

Achieved



Poised to release 13.5 m in 2012-13

Strategies for Rural MarketPenetration
Strategies to improve affordability • Continue to give Favorable

relative price • Access Subsidization • For economically Backward • By State Governments • Oil Marketing Companies-

• Corporate Social
Responsibility • Conversion of Kerosene/firewood

Low Cost, Self Employment Rural Model
• Novel concept of appointing small format distributorship • Shall cater only to Rural Areas • GLV sustainable for cluster of villages having about 4500 families. – 40 % population villagers may go for LPG. Steps to improve Viability – Proprietor to operate with the help of 1 staff

– Smaller Godown and showroom located close by
– Cylinders will be sold on cash and carry basis – Plan to have more than 6600 RGGLVS by 2015.

Low Cost, Self Employment Rural Model
Achievement upto Aug’12 o Advertised 5261 RGGLVs (IOC – 2651, BPC – 1309 & HPC –
1301) o LOIs for more than 2000 RGGLVs issued o 1475 RGGLVs Commissioned (IOC-672, BPC-374 & HPC-429)

During 2012-13 planned to advertise 1000 RGGLVs and commission 800 RGGLVs.

Community Kitchen Scheme
• Common LPG Kitchen facility to all the villages in the country, having a population of more than 5000. • Corporate Social Responsibility (CSR) Funds by PSU Oil Companies for implementing the scheme.

• Cylinder Manifold/Cylinders, stoves and related accessories viz. pressure regulators, Surakhsa hoses, are provided by the OMCs free of cost. – Cooking platform also provided free of cost, if required.

Community Kitchen Scheme
• Parameters for selection of village
– – Population of the Village must be more than 5000. Less than 50% of the village households have domestic LPG connections.

• Total 1933 no of Community Kitchens have been installed under this scheme by PSU Oil Marketing Companies • 2.27 Crores have been spent under this scheme

Community Kitchen SchemeReasons for not many takers
• • • • • • Poor response, particularly from the Gram Panchayats Viability of operation Cooking habits Carrying utensils cleaning Convenience Community bias

Rural and migrant population, deprived section of the society in the and people visiting the Government Hospitals and Health Centers from remote villages have been benefitted from this scheme.

Kerosene Scheme - Delhi





• • • • •

Delhi Government announced a scheme ‘Kerosene Free Dilli”to make NCT Delhi Kerosene free New domestic LPG connection will be issued to the BPL / AAY & JRC Card holders of Delhi getting Kerosene supply, free of cost. 50% of Security deposit Cylinder & Pressure Regulator i.e. Rs 700/- is borne by Delhi Government, remaining Rs 700/- by OMCs through CSR. For JRC (Jhuggi Resettlement Colonies), entire Rs 1400/- will be borne by Delhi Government. 2 Burner Hotplate, Suraksha Hose, DGCC Book & Installation Charges (fixed at Rs 1250/- per connection) will be provided by the Delhi Government. The cost of product i.e. RSP of 14.2 Kg LPG will be borne by the consumer. For DBC connection, the amount of security for additional cylinder and product will be borne by the consumer. Approximately 3,20,000 are expected to be released under this scheme Allocation of Kerosene will be progressively reduced with release of connection.

Subsidy Administration

Proposed Subsidy regime- Task Force



Phase I- Capping Subsidy


• • • • •



Restrict number of subsidised cylinders per household Remaining Cylinders at market price
Subsidy based on Aadhaar Authentication Aadhaar based Direct Subsidy Transfer to customers Pilot in two cities and all India Roll out Subsidy to Targeted Segments

Phase II- Direct Subsidy Transfer



Phase III- Subsidy only to Segmented Customers.

Capping and impact on Rural Marketing
Refill (Cyl pa)
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 >16 TOTAL

Urban
% 4.97% 4.14% 4.92% 5.89% 6.86% 7.94% 8.84% 10.13% 10.36% 10.01% 9.04% 6.80% 4.36% 2.64% 1.39% 0.90% 0.46% 0.35% 100% Cum% 4.97% 9.11% 14.03% 19.92% 26.78% 34.71% 43.55% 53.68% 64.04% 74.05% 83.09% 89.89% 94.25% 96.89% 98.29% 99.19% 99.65% 100.00%

Rural
% 7.49% 5.76% 7.24% 8.87% 10.02% 10.36% 9.76% 9.09% 8.50% 8.11% 5.97% 3.90% 2.27% 1.22% 0.98% 0.19% 0.17% 0.11% 100% Cum % 7.49% 13.25% 20.49% 29.36% 39.38% 49.73% 59.49% 68.59% 77.08% 85.19% 91.16% 95.06% 97.32% 98.55% 99.52% 99.72% 99.89% 100.00%

Urban Mean Mode Median 6.96 8 6.5

Urban Rural 6.41 8 6.5

Rural 5.69 7 5.5

The rural consumption is still low as compared other categories. The capping of 6 cylinders will not affect them by much. For the Urban consumers the effect of capping will be marginal.

Other efforts to eliminate Fake identities
• Control Order provisions- Changes suggested
– One household one connection – Interpretation of Household

• Multiple connection detection modalities
– Algorithms used to detect same name and address

• KYC- Mandatory • The effect on actual coverage

Effective Penetration as on 01.08.2012
Coverage after De- dup exercise assuming only 50 % as Multiple
Non LPG-PNG population % age Net number Population wherever population % age of of LPG and coverage coverage is covered population PNG under LPG + more than under LPG without LPG connections PNG 90%, 10% is and PNG considered non covered
125223142 659356158.8 54.48% 532073810.5 43.97%

Current Coverage based on Population as per LPG Domestic Blocked (50 % already Blocked Provisional Customers assumed as connections Census 2011 Multiple)

Average household size as per Census of India 2001

ALL INDIA

1210193422

137652285

134406886

4.91

Coverage after De- dup exercise considering actual blocked
Non LPG-PNG % age population Average Population % age of population wherever coverage household size as coverage under population covered under is more than 90%, per Census of LPG + PNG without LPG LPG and PNG 10% is considered India 2001 non covered

Coverage based on Population as per LPG Domestic Blocking done after Provisional Census Customers De- Dup exercise 2011

Currently Blocked

ALL INDIA

1210193422

137652285

13304138

4.91

614303719

50.76%

606922754

50.15%

LPG Demand Projections
25 20

Demand
15.29
16.28 11.16 17.98 12.41 19.26 13.09

20.42 14.6

15 10 5 0 2011-12

9.98

Indigenous Production Port Capacity

5.3

5.5
2012-13

5.6
2013-14

6.2
2014-15

5.8
2015-16

Import requirement

Expected – CAGR 7%

• LPG Supply Outlook
• Demand expected to reach 20millionTonnes by 2016 •Port Capacity available for increased import

Conclusion
 Rural Penetration needs concerted efforts  RGGLV is providing better accessibility  Joint Schemes with CSR and State

Governments improving affordability.
 Better subsidy administration provides

opportunity to target and provide assistance for intended beneficiaries
36

Thank You

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...gloomy landscape, India stands out as a haven of stability and an outpost of opportunity. Its macro-economy is stable, founded on the government’s commitment to fiscal consolidation and low inflation. Its economic growth is amongst the highest in the world, helped by a reorientation of government spending toward needed public infrastructure. These achievements are remarkable not least because they have been accomplished in the face of global headwinds and a second successive season of poor rainfall. The task now is to sustain them in an even more difficult global environment. This will require careful economic management. As regards monetary and liquidity policy, the benign outlook for inflation, widening output gaps, the uncertainty about the growth outlook and the over-indebtedness of the corporate sector all imply that there is room for easing. Fiscal consolidation continues to be vital, and will need to maintain credibility and reduce debt, in an uncertain global environment, while sustaining growth. On the government’s “reformto-transform” agenda, a series of measures, each incremental but collectively meaningful have been enacted. There have also been some disappointments— especially the Goods and Services Tax—which need to be retrieved going forward. Accelerated structural reforms at the Centre, the dynamism of competitive federalism, and good economics being good politics could all combine to maintain the fundamental promise that is India. For now,......

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