Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
India's LPG penetration rate reached 99.5% following the
completion of its landmark Pradhan Mantri Ujjawal Yojana (PMUY)
program. India Prime Minister Narendra Modi's PMUY program targeted
to reach 100% LPG penetration in all states by the end of the
financial year ending in March 2023. Monthly LPG demand in the
residential/commercial segment increased from 1.71 million metric
tons (MMt) in September 2017 to 2.03 MMt in September 2019 and is
expected to further increase to 2.38 MMt by the end of 2021,
approaching full LPG penetration in all states. The country's
eastern states are among the areas with lower LPG coverage. East
coast LPG infrastructure developments will help enable higher LPG
penetration in the region. Indian LPG demand will continue to grow,
but as the country pushes for a gas-based economy, piped natural
gas (PNG) will likely take a bite out of LPG's market share over
time, especially in western India.
Indian domestic LPG penetration reached
99.5%
India marked the beginning of the most significant LPG
connection drive in the world via the rollout of the PMUY program
to provide deposit-free LPG connections to below-poverty line
households on 1 May 2016. The program was one of the biggest
catalysts and enablers for employing a cleaner fuel, LPG, to be
used for cooking, and was in line with India's Paris Agreement
commitment to reduce its greenhouse gas emissions.
The PMUY program initially started with a target of providing 50
million LPG connections; the target was subsequently raised to 80
million connections, and this was achieved by September 2019, with
a 96.5% LPG penetration. The LPG coverage has since continued to
grow and reached 99.5% by January 2021 (see Figure 1).
Under the Liquified Petroleum Gas (Regulation of Supply and
Distribution) Order 2000, one household is eligible for only one
connection. Under the regulation, a family comprising a husband,
wife, married children, and dependent parents who live together and
share a common kitchen is considered as one household. In order to
compare the LPG penetration among states, the Indian government
developed an estimate of LPG coverage (%). The LPG coverage is
estimated based on the ratio of number of connections to the number
of households in the state. The number of households for the year
2021 is estimated by extrapolating the 2011 household census data,
which is published by the Government of India every 10 years. IHS
Markit utilized this information to provide a view of LPG
penetration.
Figure 1
Click image to enlarge.
Most of the northern and southern states have reached nearly
100% LPG coverage. However, LPG coverage in some of the eastern and
northeastern states is still lagging. This unevenness in LPG
coverage can be associated with factors such as infrastructure and
financial disparity among the states. The Indian government's
objective to provide the 10 million additional connections under
the PMUY program in the next two years is expected to benefit
eastern states and with the possibility of achieving 100% LPG
coverage across all of India, including in the eastern and
northeastern states.
Infrastructure development to enable fuller LPG adoption
in eastern states
The western states in India are generally more advanced in terms
of infrastructure and family income when compared with the eastern
states, which is the primary reason why a larger number of PMUY
beneficiaries are from the country's eastern region. However, as
Indian GDP grows, the number of LPG connections and disposable
income of citizens will also grow. This will lead to an increase in
LPG cylinder refill rates, especially from the PMUY beneficiary
customer base, calling for additional import and bottling capacity
in the region. The west coast infrastructure will continue to be
enhanced owing its vicinity to the Middle East and potential
nondomestic LPG demand growth, while growth in demand for LPG for
cooking from eastern states will drive long-term domestic LPG
growth in the country.
Recently, Bharat Petroleum Corporation Limited (BPCL)
commissioned its 1 million-ton-per-annum LPG terminal at Haldia,
taking total capacity to 9.8 MMtpa. Future projects such as the
Dhamra terminal by Adani, the Paradip terminal by Indian Oil
Corporation limited (IOCL), and the Krishnapatnam terminal by NGC
Energy will add 4 MMtpa of additional import capacity (see Figure
2).
Figure 2
The western region will lead the way toward a natural
gas-based economy, posing risk to LPG coverage
The Indian government's push for the natural gas-based economy
will increase natural gas usage in the energy sector. Under the
City Gas Distribution (CGD) policy, pipelines are being planned,
constructed, and commissioned to connect the consumer with PNG
access. This includes sectors like domestic and commercial, which
have been mainly served by LPG. This poses some risk to further LPG
penetration and could also at the same time erode LPG's share in
these end-use markets.
For every 1 million domestic LPG connections converted to PNG,
about 110,000 metric tons of LPG demand is lost per year. The
natural gas pipeline additions will take time, and LPG demand is
still expected to register an annual growth of 3-4% in the near
term.
Figure 3
As western states in India are relatively well off in terms
infrastructure and income, PNG connections are more prominent in
the western region, supporting future PNG growth. As a result, this
region's LPG demand growth could be limited; for example, Gujarat
has the highest number of PNG connections, leading to lower LPG
coverage (see Figure 1 and 3). However, the eastern region is
likely continue to support LPG demand, given the region's better
LPG connectivity and infrastructure situation as compared with that
for PNG.
Gain greater insight into global and regional ethane and NGL
markets with IHS Markit Midstream Oil and NGLs research. Learn more here.
Posted 30 April 2021 by Vivek Prakash Chaudhary, Research Analyst, Energy, Midstream Oil & NGL Research and Consulting, IHS Markit and
Yanyu He, Ph.D, Executive Director, Natural Gas Liquids (NGL) Research and Consulting, IHS Markit
