Presentation On - lpgc.or.jp · Presentation On . Date :- 08.03.17 . 8. th. March 2017, Tokyo...

Indian LPG Market Growing Demand & Its challenges

Presentation On

Date :- 08.03.17

8th March 2017, Tokyo Manish Grover International LP Gas Seminar 2017 Deputy General Manager Indian Oil Corporation Ltd

LPG Marketing in India

Brief on India and IndianOil.

Supply Demand Scenario & Business Opportunities

Transformation In LPG Business

Contents

India -A Land of Opportunity

FORM OF COUNTRY Federal Republic with 29 States and 7 UTs

POPULATION 1.27 billion, 2nd most, 2nd highest English speaking country

ECONOMY USD 2 trillion (current prices) Third largest in PPP terms $8.727 trillion (est 2016) GDP Growth rate 7.5% in 2015

FOREX RESERVE USD 356 bn

MOBILE INTERNET PENETRATION 300 million users (estimated) by 2017

GLOBAL COMPANIES 7 Companies in Fortune 500

1461 1391

366

India China US

Projected Population in 2030 (million)

32 43 39

India China US

Projected Median age in 2030 (in years)

47

-10 -17

India China US

Labour force surplus/deficit by 2020

Source: IMF, April 2016

2.4% 2.4% 2.4% 2.5% 0.9% 1.6% 1.5% 1.6%

7.3% 6.9% 6.5% 6.2% 7.2% 7.3% 7.5% 7.5%

3.4% 3.1% 3.2% 3.5%

2014 2015 2016 2017

GDP Growth Rate (%)

US EU China India World

IMF Projections

India’s Economy Fastest growing major economy Domestic market - main driver Major Reforms Steady stream of business opportunities led by policy initiatives Low Oil Prices

India –The Bright spot

India –Changing economic landscape

0.0

4.0

8.0

12.0

CPI Inflation

CAD as a % of GDP

Fiscal Deficit as a% of GDP

Forex Reserves

('00 billion US$)

Improved Macro-Economic Stability

2013-14 2014-15 2015-16

-0.5 1.5 3.5 5.5 7.5 9.5

Services Industry Agriculture

India: Segment-wise Growth (%)

2013-14 2014-15 2015-16

Macro economic Stability Manufacturing and Service sector output is on the rise Index of Industrial Production (IIP) accelerated Return of macroeconomic stability - inflation declined, Current Account Deficit (CAD) in

control Fiscal Consolidation, Subsidy rationalisation All time high Forex Reserve Source: CSO

Demand • Strong domestic growth due to

rising rural income middle class young population

• Growth in exports • Transformation through “Make in

India”

Innovation • Competition and

opportunities in the domestic market to boost innovation

• Global linkages leading to creation of Innovation and R&D hub

Investments • Significant cost advantages • A large pool of skilled

manpower and a growing technology base

Policy support • Focus on Infrastructure

development • Wide array of policy support,

structural reforms

Advantage India

2013 GDP in PPP $ 6883 bn

2040 GDP in PPP $ 31,714 bn

Source: WEO, IEA

Advantage India

IndianOil - Touching a Billion Lives

7

LPG Customers - 9.88 crore

45,212 Customer Touch points 11 out of 23 Refineries in India

80.7 MMTPA Refining capacity (35%)

11750 kms of Crude and Product pipelines (85.5 MMTPA)

R&D facility with 454 active Patents (270 - International)

Indmax Technology for increasing LPG yield

2nd largest player in domestic petrochemical market (Export to 70 countries)

City Gas distribution xploration

India’s largest Commercial Enterprise. Revenue USD 61 Billion & Profits USD 1589 Million in 2015-16

Regular ROs

18672

KSKs 6691

Terminals/ Depots

129 LPG Distributor

ships 9144

LPG Bottling Plants

91

SKO/ LDO Dealers

3908

AFS 100

Consumer Pumps 6477

As on 01.04.2016




Contents


LPG Marketing In India

o LPG Marketing Commenced in India in 1955.

Started by Burmah Shell in Mumbai. State Owned Enterprises (SOEs) commenced LPG distribution in

1965. LPG used mainly for the purpose of cooking.

o Later LPG also marketed for following purposes :

Non Domestic LPG for Commercial use. Bulk LPG for Industrial use. Auto grade LPG for vehicles.

o Domestic LPG is primarily being sold at subsidized prices.

o Private Enterprises in other than domestic segment.

9

Domestic LPG Packed product in 14.2 Kg & 5

kg cylinders, home delivered through distributors

Non Domestic LPG Packed product in 5kg, 19Kg,

35 Kg and 47.5 kg delivered supply through distributors.

Industrial Delivered to Storage Tanks of

Customers Transport (Auto LPG)

Through Retail Outlets along with Gasoline/Diesel

Segment wise break-up (%) (2015-16)

Domestic 89.4 %

Non-Domestic 7.6 %

Industrial 2.1 % Transport 0.9

%

Segments of Indian LPG Industry

Ever Growing Domestic Segment

11

Domestic segment constitutes the

substantial portion of Indian LPG market

Customer strength in Domestic segment grew from 10 million (1985-86) to 201 million (2015-16) in about 3 decades

Consumption increased from 1.2 MMT in 1985-86 to 17.18MMT in 2015-16

Customer Growth (in Mill.) 1985-2016

Sales in MMT: 1985-2016

0

50

100

150

200

250

0 2 4 6 8

10 12 14 16 18 20

Players in Indian LPG Industry

o The major players in LPG marketing are three State Owned Enterprises (SOEs) :

Indian Oil Corporation Ltd (IOCL) Bharat Petroleum Corporation Ltd (BPCL) Hindustan Petroleum Corporation Ltd

(HPCL)

o Private Enterprises (PE)

Aegis Gas Aegis Logistic Indian Oil Petronas Pvt. Ltd (IPPL) Reliance Industries Ltd (RIL) SHV Energy TOTAL Oil India Pvt. Ltd Hindustan Aegis

IOCL Brand

HPCL Brand

BPCL Brand

12

Channel Partners in Indian LPG

o LPG Distributors. Packed LPG marketed through Distributors appointed by SOEs.

o Non Domestic LPG Retailers. Appointed for marketing Non-Domestic Packed LPG.

o LPG Business Associates. Appointed for tying-up Bulk /Non-Domestic Packed LPG.

o Retail Outlets Dealers. Auto LPG & Free Trade LPG (FTL) sold through existing ROs.

o Bulk / Packed LPG Transporters Bulk - From LPG Sources (Import Terminals/ Refinery/ Processing

Plants) to Bottling Plants. Packed - Cylinders from Bottling Plants to LPG distributors.

13

Pricing of LPG in Indian LPG Market

o Domestic LPG Protection of Domestic Consumers from Price fluctuations. Difference of Market Price & that charged from Domestic

consumer is given by Govt. as subsidy which is tranferred in the bank a/c of consumers

Currently the Subsidy available for customers of State Oil Marketing Companies.

o Non Domestic/ Industrial LPG Import Parity Price basis international market price during

M-1 month.

o Auto Fuel Priced in co-relation to price of Gasoline in retail market.

14

Pricing of LPG:- Trend

Subsidy tends to distort market & leads to Diversion. 15

0

200

400

600

800

1000

1200

1 Apl 2002

1 Apl 2004

1 Apl 2006

1 Apl 2008

1 Apl 2010

1 Apl 2012

1 Apl 2014

1 April 2016

Market Price RSP

Under Recoveries on Domestic LPG

This under recovery burden could not be sustained indefinitely. 16

₹

55230 83620

102460 107010

155230 176000

142570

217720

299970

395580

464580

365800

140000

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16




Contents



Reduction In subsidy Burden

Transforming society

Enhanced customer service

Deduplication based on Name ,address , Aadhaar & Bank a/c eliminating multiple connections


Capping of Cylinder

Detection of Multiple connection

6 Cylinders Per Year , further revised to 9 & 12

PAHAL Direct transfer of Subsidy to bank a/c of customers

GiveItUp Subsidy

Segregation based on Income Subsidy to the

targeted segments Voluntary Surrender of Subsidy

No subsidy of income above 10 lacs

Capping :- Statistics

No of cylinders

% consumers availing these

cylinders

% subsidised cylinders which

will come in quota

1 5.6% 2 6.2% 3 7.3% 4 8.6% 52.23% 5 9.6% 62.62% 6 10.0% 71.63% 7 9.9% 79.21% 8 9.2% 85.36% 9 8.2% 90.19%

10 7.0% 93.85% 11 6.0% 96.50% 12 6.9% 98.29% 13 2.6% 99.08% 14 1.2% 99.50% 15 0.6% 99.74%

16 & Above 1.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1 2 3 4 5 6 7 8 9 10

11

12

13

14

15

16 &

Abo

ve

% consumers availing these cylinders

Multiple/ Fake Connections Detection

Unification of data base of all 3

OMCs for Deduplication

Dedupe based on

Aadhaar , bank a/c , Name &

Address

Blocking / cancellation

of connection

after verification

LPG Control Order

One House Hold one subsidized LPG connection

Based on the above deduplication process, over 10 million LPG connections were blocked on industry basis , which contributes to the saving of around

$ 300 million for the Fy 2015-16

Aadhaar / bank a/c details as the

key value for subsidy transfer

Grace period of 3 months followed by parking period

of 3 months

Refill at Market rate all

customers

Subsidy component in

bank a/c to CTC customers

PaHaL :- Scheme details

PaHaL :-Cash Transfer Process

Customer receives subsidy after joining Scheme( i.e. becoming CTC cash transfer

compliant) , either by submitting his Aadhaar with LPG distributor & bank or By submitting his bank a/c details with LPG distributor.

.

Wide publicity of scheme- 447061 posters , 102829 standees &

72847 banners installed.

Advertisements in TV, Radio and Newspapers.

Comprehensive website www.MyLPG.in launched

More than 1 billion SMSs sent.

300 Seats call centre to answer queries

Setting up of Common Grievance Redressal System

PaHaL :- Extensive IEC

http://www.mylpg.in/

PaHaL :- Moments

Above table indicates that diversion of domestic LPG to commercial / auto sectors

has reduced which has attributes to saving in subsidy

PaHaL :-Effect On LPG Sales

Period

Domestic sale growth NDNE packed sale

growth Auto LPG

Growth fy

15-16

Growth fy

14-15

Growth fy

15-16

Growth fy

14-15

Growth fy

15-16

Growth fy

14-15

April till

March 7.1% 11.31% 39.3% (-)2.10% 4.5% (-)15.69%

PaHaL :-Savings

Savings in Pahal

Fiancial saving in 15-16

On account of weeded out customers :- 35.5 million weeded out customers ,

savings $1000 million

On account of NCTC customers in DBTL:-13.2 million , NCTC customers, savings of $ 372

million

Non-Financial Benefits Improved delivery time/reduction in backlog

Lesser policing of supply chain activities

Focus on Customer Satisfaction:

Launched in 54 districts on 15.11.14 & PAN India on

01.01.15

163 million customers (out of 193 million Active Consumers ,84%) joined the

scheme

$6500 million transferred to bank a/c

of customers

Estimated annual savings of $ 3 billion

Failure rates of cash transfer below 0.2%

Data as on 01.02.17

Acknowledged in Guinness Book of World Records

PaHaL Achievement

Subsidy to Targeted segments

29

Disparity In Society

Don’t have LPG connection to cook Don’t need subsidy at all

30

Subsidy to Targeted Households

Income Will

No Subsidy to well-to-do customers

Subsidy to Targeted segments:- GiveItUp

Hon’ble Prime Minister Flagged GiveItUp Scheme on 28.03.15

10.4 million ( over 1 cr) customers have voluntary GivenUp LPG Subsidy counting more……

This is initiative has lead to the annual saving of around $270 million for the fy15-16


32

Eminent persons and Celebrities Contribution to this mass movement The Journey


Intensive Information Education & Communication Campaign

33

The Journey

Bulk SMSs

Appreciation letters to earlier GiveItUps

Scroll of Honor on web, Information of Linked BPL beneficiary by web/SMS

Testimonials of GiveItUp customers on Youtube

Personalized Thank You letter by Hon’ble PM


Personal Connect with masses

As per the directive, w.e.f 01.01.16 10 NO LPG Subsidy to customers earning more than

10lacs ($ 15000)

Total 7,91,258 customers are Excluded from subsidy

NO subsidy for Income above Rs 10 lacs ($ 15000)





Enhanced Customer Service

A comprehensive website available in 13 Indian languages facilitating consumer for various LPG transactions

SAHAJ :- LPG connection at Doorstep ,; having option of online payments by credit / debit cards

Online Transfer of connection ; no need to go LPG distributorship

Transparency portal:- Having consumer & transactional level data with analysis for 16 crore consumers in public domain


SMS/IVRS booking facility :- most simple & convenient way of refill booking receiving 3.5 bookings per month from this utility..

Emergency helpline for LPG 1906 , calls attended within 2 hrs..

Prefer time Delivery :- Delivery at customer convenience at his preferred day and time

Dedicated callcenter ( 1800 233 555) of 350 seats for LPG queries and complaints


Shop In One Go :- NFR at LPG Distributors

Future Prospects

Pan India online Transfer

Payment option by credit/ debit cards &

wallets :-On delivery

Door to e-Knock Delivery

Booking & Payment from e-commerce sites

Common Loyalty program (CLP)

Customer feedback , opinion polls & Analytics

Enhanced Customer

Engagement





Pradhan Mantri Ujjwala Yojna

A major policy intervention by Government of India to provide clean fuel (LPG) for cooking to BPL women of the country to counter indoor air pollution.

LPG Connections To Weaker Section


• 269.8 Million. i.e. (21.92% )Below poverty line population in India.

• The spread of LPG in urban/ semi-urban areas with coverage in middle class and affluent households.

• Serious health hazards with cooking based on fossil fuels. WHO estimates, about 5 lakh deaths in India alone due to unclean cooking fuels.

• Major premature deaths were due to non-communicable diseases such as heart disease, stroke, chronic pulmonary disease and lung cancer.

• An open fire in the kitchen is like burning 400 cigarettes an hour.

• Providing LPG connections to BPL households will ensure universal coverage of cooking gas in the country

• Empowers women and protect their health & reduces drudgery and time spent on cooking.

Need for Transformation

• 5 Crore LPG connections in next three years.GOI funding for connections cost of Rs 1600/-.

• During 2016-17, target is 2 Crore connections. • Loan provision for First refill & Stove by OMCs

Scope and Support

• BPL women having their name in SECC 2011 data. • Preference to States having lower LPG coverage ;

SC/ST BPL families covered Target Beneficiary

• Aadhaar as primary key in verification & deduplication.

• Deduplication also on bank a/c & AHL TIN • Pre NC release protocol ;safety education ensured

NC Release process

PMUY :- The Scheme

Launch in Balia on 1st May 2016

Scheme Flagged By Hon’ble Prime Minister Shri Narendra Modi

Saharsa, Bihar by Shri Rajesh Ranjan

Hon'ble Minisiter of Micro,Small & Medium Enterprises & MP from Deoria Shri Kalraj

Kidwai, Kanpur , UP by Dr. Murli Manohar Joshi

Pilibhit in UP by Hon'ble minister of Women & Child Welfare and MP from Pilibhit Smt Maneka Gandhi

Launches by MPs & MLAs

Wife of Martyr Nayak Kaushal Yadav.

Retd Lt Col Yeshwant Singh Freedom Fighter & ex-MLA Morbi, Shri.Gokaldas Parmar

ex-Serviceman Indian Army Mr. Avanindra (Annu) Sharma, Kargil Return, Operation Vijay at Kabirdham District

Distribution on Independence Day

Publicity :- Press Releases

Publicity :- Social Media

Safety in LPG installation

Safety and Insurance Card to each PMUY beneficiary

Statistic :- PMUY

Scheme launched in

16 states

More than :- 2.51 cr

Applications

1.67 cr connections

installed

For1 cr connections Loan given by OMCs

22.02.17

Outcome

Parameters As on 01.04.16 As on 01.02.17 Number of Registered customers 20.16 cr 22.91 cr

Number of Distributorships 17916 18545

LPG Coverage All India 61.9% 71.2%

Uttar Pradesh 55.4% 72.8% Bihar 31.5% 42.6%

Jharkhand 27.9% 32.9% Odisha 31.8% 41.1%

Madhya Pradesh 41.4% 53.9% Chhattisgarh 31.0% 44.4%

Rajasthan 62.9% 76.3% West Bengal 51.5% 64.1%

Aadhaar seeding % in LPG 74.04% 83.89%

Future Prospects :-

Better Tomorrow for All of Us Clean fuel for every one

Donation of LPG connection

LPG connection cost sponsored:- through

donation Individuals or institutions

OMCs will create pool account:-through Non-

Profit Organization

Beneficiary :- Any Identified poor person

Operational modalities:- Similar to PMUY

Salient Features

Donor:-

Individual or Institution

Can donate for one or more LPG

connections

Donations by Online & offline modes will be

made available

All Donations will feature in OMC pool a/c created through Non Profit Organistion

List of donor shall also be displayed on web

Identification of Beneficiary

Featuring in SECC list, but are not eligible for PMUY

Indentified by Donor BPL list/person certified by

state / district administration

58

Funds for new LPG connection to BPL

customer ?

Security Deposit amount of LPG connection from PMUY

Subsidy of the refill from GiveItup Customer

Transforming Lives




Contents


Demand Drive

19

GOI’s Initiative

Cleaner Cooking Fuel

for ALL

Affordability - Low International Prices - Less Subsidy Burden

Accelerating Economy - Improved Consumption - Robust GDP Growth

Accessibility - No barrier for LPG connection - PMUY Scheme

Availability - Improved Distribution Network

19

19.21

21.89 23.65

25.49 27.32

29.17 30.64 31.50 32.13 32.77 33.42 34.08 34.76 35.45 36.16 36.88 37.61

-

5

10

15

20

25

30

35

40

2015-16 2017-18 2019-20 2021-22 2023-24 2025-26 2027-28 2029-30 2031-32

Demand

Growth after saturation considered as 2% from 2021-22 onwards

Demand Projection

Increased Demand & Imports -Industry

19

10.54 11.46 12.59 12.54 13.14 13.89

21.89 23.64 25.48 27.32 29.17 30.64

11.35 12.18 12.89 14.78 16.03 16.75

-

10.00

20.00

30.00

40.00

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Production Demand Imports

Short Term

Medium Term Long Term

Figs in MMT

14.61 16.28 16.65

31.50 32.77 34.08

16.89 16.49 17.43

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

2022-23 2024-25 2026-27

17.70 17.70 17.70

34.76 36.16 37.61

17.06

18.46 19.91

-

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

2027-28 2029-30 2031-32

Region wise Demand Supply Deficit

4.9

2.3 4.1

7.8 5.6

3.3

9.3

6.2

3.6

11.2

7.1

4.4

North + West East South 2016-17 2021-22 2026-27 2031-32

INDUSTRY : LPG Import Projection (MMT)

Opportunities

Imports :

Present import requirement ~ 11 MMTPA

Additional import requirement ~ 1-1.5 MMT per year

Procurement primarily through Term Contract with NOCs

First time procurement through Term Tender for 2017

Additional requirement of vessels – Term / Voyage

Setting up of import terminals o Immediate requirement on West coast o State of the Art Technology o With jetty infrastructure o High to very high handling capacity

Opportunities

Infrastructure :

Pipeline Infrastructure o Present movement by Road > 65% o Environmental and safety concerns o Possibility of supply chain getting

affected due to enroute issues o Cost competence

Opportunities

9

Infrastructure :

Marketing Infrastructure o Increased bottling requirement –

Mainly for Govt. Companies o Technological intervention /

upgradation for higher capacities o Automated bottling facilities o Testing facilities for bottles o IT solutions for effective

distribution

Opportunities

Equipment – Supply & Manufacturing : 30 million customers every year i.e. 40 – 50

million cylinders Innovative techniques to reduce the weight

of empty bottle Composite cylinders (cost and safety

concerns) Gas Stoves – Low cost to high end kitchen

solutions Manufacturing base for Indian sub

continent Plant equipment

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