Satisfying Enormous Growth Potential

7th to 9th October-2009, Rio de Janerio, Brazil

Rural Demand In India

Presentation by:Apurva Chandra,

Joint Secretary(Marketing)Ministry of Petroleum and Natural Gas,

Government of India

LPG Market- Uniqueness of India• Second largest packed LPG market in the world

• LPG in cylinders, home delivered to more than 108 million households.

• Customer population increasing by 6 million each year.

• For better affordability product is subsidized.

• 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.

• Deployed Latest Technology for • Storage- Cavern

LPG- History & BackgroundLPG- History & Background

• LPG Marketing Commenced in India in 1955– Started by Burmah Shell in Mumbai– Public Sector Oil Company , Indian

Oil Commenced Operation of LPG Marketing in 1965 at Kolkatta and Patna

• Product availability improved from 1998– Customer strength grew from 20M

to 100M in a decade– Sales jumped from 1241TMT in

1985 to 11400 TMT in 2008– Currently catering to more than

50% of Indian population.

• Growth poised more towards rural markets

Customer growth rate(in millions)1985-2009

10.616.2

23.2

47.4

84.5

101.7107.8

0

20

40

60

80

100

120

1985 1990 1995 2000 2005 2008 2009

Sales in TMT1985-2009

1241

2414

3850

5902

9979

11339

0

2000

4000

6000

8000

10000

12000

1985 1990 1995 2000 2005 2008

Various Products Marketed in LPGVarious 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

PACKED DOMESTIC

91%

AUTO LPG2%IND BULK

2%

NON DOMESTIC

5%

PACKED

NDNE

IND BULK

AUTO LPG

Share of Products

Domestic LPG Business OverviewDomestic LPG Business Overview

• Total Customer Strength : 108 M• Average Enrolment (current) : 6 M Yearly• Daily Bottling : 2.4 million• Bottling Plants : 190

Refineries, Gas Processing Plants & Imports

190 Bottling Plants

9382Distributors

108 million Customers

– There is steady growth in LPG consumption in the last 4 years.

(Figs. In TMT)

.

10052

10531(5.5%)

11332(7.6%)

11778(4%)

9000

9500

10000

10500

11000

11500

12000

Domestic LPG

2005-06

2006-07

2007-08

2008-09

LPG Marketing Overview Consumption Pattern - LPG

Slice 30%

Slice 40%

Slice 50%

With LPG87%

Without LPG13%

Slice 30%

Slice 40%

Slice 50%

With LPG17%

Without LPG83%

Urban28%

Rural72%

Urban

Ruralbetween

2000 and 500014%

Above 50003%

below 200083%

Slice 50%

Slice 40%

Population wiseDivision- Rural

Domestic LPG PenetrationDomestic LPG Penetration

Urban- Rural Population

14%

83%

3%

LPG Penetration- Issues in LPG Penetration- Issues in Rural AreasRural Areas

Most of Rural Households natural biomass or kerosene

Biomass based fuels lead to health hazards and pollution

Use of Kerosene by the households at a subsidised rate.

Per Capita Income of rural areas- affordability

Viability of distribution cost as rural households are scattered.

Potential Available in Rural Area- more than 50 million

Vision 2015- Govt.’s Thrust on LPG in Rural Areas

• To enroll total of 55 m new LPG connections by 2015

• 8.5 million every year

• Mostly in Rural areas

• Through existing distributors and Small Format Distributors

• Conversion of Kerosene customers

Strategies for Rural Market- PenetrationStrategies for Rural Market- Penetration

Models to improve reach•Through existing Distribution network• By Expanding Existing model of Distributor Network • Low Cost , Self Employment based LPG distributors as a

viable model•Community Kitchen

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

Model based on Viability

• Gramin LPG Vitrak (GLV) meaning Rural LPG Distributor

• GLV sustainable for cluster of villages having about 4500 families. – 40 % population villagers may go for LPG.

Scheme to improve Viability

– 1800 consumers required for sale of 600 cylinders of 14.2 kg per

month.

• Per Capita 5Kg per month

– Proprietor himself to operate with the help of 1 staff

• Option for part time job

– Smaller Godown and showroom located close by

– Cylinders will be sold on cash and carry basis

– Distributorship to those who are in possession of requisite land at

advertised location

Low Cost, Self Employment Rural Model

Community Kitchen

• Scheme introduced in 2003-04 for Community Kitchens in Hospitals, Mid day meal scheme etc.

• Model extended to areas below viability of distributorships and for villagers with low purchasing power.

• Kitchen to be set up by nearest distributor.

• Utensils and stoves through Marketing Companies/State Government.

• Villagers to use facility on user fee basis.

• Care taker by Village officials/Distributor.

Supply Demand Balance

0

3000

6000

9000

12000

15000

2005-06 2006-07 2007-08 2008-09

Year

TM

T

Import

Indigenous Production

Demand

0

3000

6000

9000

12000

15000

18000

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Year

TMT

• LPG Demand Projections

• Expected – CAGR 8%

• Asia Pacific – CAGR 6%

• LPG Supply Outlook

•Existing Refineries being expanded and 3 new Refineries being commissioned.

•However, dependence on Imports to continue

•Two import facilities Kochi & Chennai 1400TMTPA

Historical

Projection

Import

Indigenous Production

Demand

MumbaiVizag

Panipat

Guwahati

Haldia

Vijayawada

Kochi

Barauni

Kanpur

Kandla

Jalandhar

Delhi

Digboi

Chennai

MumbaiHigh

Mangalore

Secunderabad

Ajmer

Paradip

Jamnagar

Loni

HaziraFacility Existing Plan/Under

Construction

Refinery 19 3

Gas Plants 10 -

Import 4(3500TMT) 2(1400TMT)

Bottling Plants

189 13

Pipelines 2182 KM 1000 KM

LPG Infrastructure

Existing Pipelines

Proposed Pipelines

Bhatinda

Kolkatta

Modes of Transportation :

LPG Infrastructure / Logistics

Railway Wagons12%

LPG Pipelines30%

Road Movement 58%

Pipeline contribution upto 35% by 2015

Investment Planned Till 2015Facility Numbers/

CapacityInvestment Million USD

Import Facility 2 (1400 TMTPA)

140

Tankage

Traditional/Mounded 14.3 TMT 50

Cavern 0.1 MMTPA 110

Pipelines

Planned 1000km 515

Investment Planned till 2015Facility Numbers /

CapacityInvestment

Million USD

Bottling Plants

Under Construction 2 X 44 TMTPA 10

Planned 6 x 44 TMTPA 40

Filing Equipments

Augmentation 900 TMTPA 20

Equipments ( Cylinders & Regulators)

65 million 1560

Total 2445

ConclusionConclusion

• In India, LPG is the most sought after fuel for domestic use.

• Government of India has developed a Vision 2015 document for

increasing use of LPG in India.

• The Vision 2015 document is focused to improve customer Service and availability of LPG.

• Government of India is committed to increase the penetration of LPG in Rural India by providing LPG at affordable price.

• As a commitment to Environment, Government of India is also committed to replace kerosene by LPG at the earliest.

Thank YouThank You

Domestic LPG PenetrationDomestic LPG Penetration

UrbanUrban RuralRural TotalTotal

Population March 2009 in Million

326.2 838.8 1165

Households in Million 93.1 156 249

LPG connections in Million

81.2 26.8 108

Penetration 85% 17% 42%

Per capita consumption (Kg/year)

128 83 117

Source : NCAER

Huge Potential Available in Rural Area

Indian LPG ScenarioIndian LPG Scenario

Demand & Production 2004-09 Sources of Bulk LPG

2583 2592

865

1491

2217

2453

1981

0

500

1000

1500

2000

2500

3000

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Import Growth (TMT) Source Countries

Source: PPAC/Industry Figures