The competition in commercial/industrial LPG (liquefied petroleum gas) segments is set to intensify with Indian Oil Corporation (IOC) planning to appoint over 100 distributors to cater exclusively to such customers.

Aimed at improving the oil company's market share and profitability, the move assumes significance for it is not only expected to give both public and private LPG marketers, but also existing Indane distributors, who deal in commercial cylinders, competition. Though both BPCL and HPCL have exclusive distributors for commercial cylinders, the numbers are small, sources in oil industry said.

Unlike the subsidised domestic (14.2 kg) cylinders, commercial cylinders, in capacities of 5 kg, 19 kg and 47.5 kg, are free market product. Their pricing is linked to import parity price and revised on a monthly basis.

114 locations

An IOC official said 114 locations for the NDNE (non-domestic non-exempt) distributorships have been identified based on market potential.

Technically, there is no restriction on the area of operation for the existing distributors with regard to commercial cylinder sales.

The exclusive NDNE distribution network would be helpful when subsidy on domestic LPG is reduced. “When the price gap narrows, households may opt for commercial LPG,” an IOC official said. The government is said to be considering imposing a cap on the number of subsidised cylinders per household in a year.

Sources in IOC said the share of commercial cylinders in the total packed (cylinder) sales is about 7.2 per cent. For IOC, the share of the commercial cylinders in its total sale of packed LPG is around 5.7 per cent. The market size of packed LPG, of the public sector oil companies, is 10.68 lakh tonnes. IOC's share is 4.05 lakh tonnes or about 38 per cent. Six of the 114 NDNE distributors have been commissioned — three in Maharashtra, two in West Bengal and one in Gujarat. Letters of intent have been issued for 44.

The existing 5,000 Indane distributors, sources added, were engrossed in distribution of cylinders to domestic segment, which forms 90 per cent of their total business volume and as such not able to focus on the commercial cylinders to the extent required. The NDNE distributors could be individuals, partners of partnership firms and both public and private limited companies having relevant experience and meeting the selection criteria.

The NDNE distributorships, which are expected to help curb/reduce illegal diversion of domestic LPG to commercial/industrial segments, would not be allowed to enrol domestic customers. The existing domestic LPG distributors, however, shall continue to sell domestic and commercial cylinders in the same market.

Sources among Indane distributors said commercial cylinder sales were highly competitive and success depended on the ability of the agents to give discounts and credit to the consumers.

Keywords: IOCLPG cylinders