ENSURING ENERGY SECURITY IN RURAL INDIA –

A CASE STUDY ON RAJIV GANDHI GRAMIN LPG

VITRAK (RGGLV) YOJANA

Dr. RAJKIRAN PRABHAKAR, MAHENDRA SINGH, C. NAGAPAVAN

ABSTRACT: Liquefied Petroleum Gas (LPG) is a convenient fuel for cooking. Though, it has
been popular fuel for urban India since 60s, most of rural India is still awaiting this tearless
fuel. The availability of LPG in rural areas is rare and the number of outlets (Gas Agencies)
is less compared to urban area, especially metros. Rajiv Gandhi Gramin LPG Vitrak Scheme
(RGGLV) aims to provide LPG to rural India fulfilling the vision of late Prime Minister,
Mr. Rajiv Gandhi, who conceptualized the idea of providing modern basic amenities at the
door steps for the rural population. This research has two major objectives. The first objective
is to understand the distribution of LPG and the objectives of the RGGLV scheme. The second
objective is to examine whether the objectives of the RGGLV scheme are realized in the past
three years of implementation. The study will examine the effectiveness of RGGLV scheme in
increasing LPG access among rural kitchens. The methodology used is descriptive research
and is based on secondary data from official sources. Based on the analysis, the challenges for
rural retailing of LPG are identified.

KEY WORDS: LPG, Rural Distribution, RGGLV, Distribution Network

INTRODUCTION

Liquefied Petroleum Gas (LPG) is a light distillate product of petroleum refining

or produced through processed natural gas. Petroleum products are usually grouped
into three categories: light distillates (LPG, gasoline, and naphtha), middle distillates
(kerosene, diesel), heavy distillates and residuum (heavy fuel oil, lubricating oils, wax,
and asphalt). LPG was first produced in 1910 by Dr. Walter Snelling. It contributed

Dr. Rajkiran Prabhakar, Asst. Professor, Faculty of Management Studies, Banaras Hindu University - Varanasi, India
Mahendra Singh, Research Scholar, Faculty of Management Studies, Banaras Hindu University - Varanasi, India.
mashmba@gmail.com
C. Nagapavan, Research Scholar, Department of Management Studies, University of Hyderabad - Hyderabad,
India

20 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
to about 3% of all energy consumed in 2010, and is relatively less polluting. There is
possibility for air pollution, but if proper equipment is used, this form of pollution is
also reduced. LPG has a higher calorific value than petrol or fuel oil, but with lower
energy density per volume unit. LPG is heavier than air and therefore accumulates
or flows along floors, which may result in explosion in case of availability of ignition
source or suffocation due to displacement of air and reduction of oxygen concentration.
LPG is therefore mixed with an odorant to help in recognition of any possible leaks.

LPG AND ECONOMIC DEVELOPMENT

The energy and development literature has discussed extensively on the

necessity of sustainable availability of energy for development challenges in multiple
sectors (Reddy, Williams and Johansson, 1997). LPG is an energy source for all types
of economic activity and is also a significant employer due to the processing plants
and distribution system. LPG industry has over 150000 direct and indirect employees
in Europe. It is a strong contributor to stable employment and a source of social
development at national and regional levels. Nigeria has a vision of using LPG as
an engine for economic growth. South Africa is attempting to switch from wood,
coal, paraffin and kerosene use along with the dependence on electricity, as domestic
use of LPG on any significant scale is non-existent compared with other countries
at a similar stage of economic development, such as Morocco, Indonesia, India and
Brazil where LPG is used extensively. McDade (2004) has established the necessity
for new business models and new partnerships in development of rural areas and the
contribution of LPG to the poverty reduction and growth.

There is a gap between the demand and domestic availability of oil and
therefore, the imports of commercial fuels are rising in the country. India’s import
dependency for oil has risen to over 70% in 2006/07. With rising energy demand,
India will not be able to meet these requirements domestically and, thus, import of
fuels will rise in the near future. It is estimated that total crude oil imports will be
around 93% of their total requirement by 2030 (TERI, 2008).

India is a net importer of petroleum products and is dependent on the world

market for its energy needs. The import of petroleum products including crude
oil requires heavy spending of foreign exchange. The availability of LPG to the
entire country as an energy alternative for cooking purposes will eliminate other
environmentally and socially costs fuel like wood, charcoal, paraffin, kerosene, etc.
LPG, therefore, is a significant contributor to the economic and social development of
any country. D’ Sa and Murthy (2004) have identified three challenges in increasing
Sona Global Management Review | Volume 9 | Issue 3 | May 2015 21
LPG use – affordability, pricing and reliable distribution. This paper focuses on the
distribution aspect of the LPG in the rural India as 90% of rural India is dependent on
some form of biomass.

The supply of LPG is challenges by the availability of LPG – indigenous capacity

and imports, transport from the production / import facility to the consumption
house hold, storage and distribution infrastructure (D’Sa & Murthy, 2004).

RESEARCH METHODOLOGY

This type of research undertaken is descriptive research and based on the

secondary sources especially statistics of Government of India and Oil Marketing
Companies (OMCs). Descriptive statistics are used to analyze the data and appropriate
inferences were drawn to address the objectives of the study.

Objectives of study

 To Study about LPG Market and its distribution in India, especially to rural
India

 To examine the effectiveness in the implementation of the RGGLV scheme

LPG Market in India

LPG is used in four different markets across the world – domestic, commercial,
industrial and transport markets. The domestic market is primarily cooking at home,
commercial market is for hotel, restaurants, etc and LPG is an energy source for the
industrial market. In 2011, India is the fifth largest consumer of LPG in the world after
USA, China and Japan and third largest in the domestic market.

LPG – a mixture of Propane and Butane and with tertiary gases – was first
distributed in 1955 in India by the Burma Shell Corporation as an alternative to the
then popular fuels coal, kerosene, wood, and dried dung cake. The marketing of LPG
prior to 1978 was restricted based on availability from indigenous sources, but was
expanded due to increase in refineries and extraction units. However, the demand
for LPG outstripped supply and necessitated import to fulfill the requirements. LPG
currently is made available to 15.43 crore households in India as on July 2013 serviced
through home delivery of approximately 3 million LPG cylinders every day. LPG is

22 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
a clean and green fuel but is costly for the majority of Indians. Therefore, government
provides subsidy to the retail consumer for cooking using LPG. Government policy
increased the popularity and huge demand – supply gap was seen since the Oil
companies had not planned for such demand in terms of cylinders (types of cylinders
is given in Table 1), gas and distribution points.

TABLE 1: Weight of Different Types of Cylinders

Type of Cylinder Weight

Domestic Cylinder 5 KG and 14.2 KG

Commercial cylinder 19 KG

Industrial Cylinder 35 Kg

India delivers around 900 million cylinders per year in the domestic market
and the market is growing at a steady rate of 8% p.a. Around 22% of the demand is
met through imports. Though the domestic market is growing steadily, its share of
the LPG consumption is coming down. The Table 2 gives the comparative share of
different markets for LPG Consumption.

TABLE 2: Share Of Lpg Consumption Of Different Markets

Share of LPG Consumption (Percent)

Market
2004 - 05 2007 – 08 2009 - 10
Domestic 96 91 89
Commercial 1 5 7
Industrial 2 2 2

Transport 1 2 2

Total 100 100 100

Source: http://petrofed.winwinhosting.net/upload/Apurva_Chandra.pdf Downloaded on April 9, 2013

During 2009 – 10, LPG consumption in households (domestic) is 89%, 7%

in commercial sector and 2 % in Auto LPG and 2% in Industry. In 2001, 17.5% of
the households used LPG as primary cooking fuel though the share of firewood as
primary fuel was 52% and 10% each on Crop Residue and Cow dung Cake. About
85% of households depend on traditional fuels such as firewood and dung cake for
cooking purposes. As per Census 2001, biomass accounts (including firewood crop

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 23

residue and cow dung) for 90% of total primary fuel consumption for cooking in
rural areas (TERI, 2008). There are three Public Sector Undertakings, termed as Oil
Marketing Companies (OMCs), distributing LPG in India for the domestic market.
They are Indian Oil Corporation Limited (IOCL) under the brand name Indane;
Bharat Petroleum Corporation Limited (BPCL) under the brand name Bharat Gas;
and Hindustan Petroleum Corporation Limited (HPCL) under the brand name
HP Gas. It is the responsibility of these agencies to service the customers with the
new connections, replacement of cylinders, providing regulators, etc. They provide
home delivery service for the replacement of cylinders and booking services are now
automated with SMS booking also permitted. The recent development in terms of
Direct Benefit Transfer also increased the responsibility of these companies and their
agents. A fact sheet of LPG Market in India is provided in Table 3.

TABLE 3: Fact Sheet of LPG Market In India

Subject Fact
Number of Public Sector Oil Marketing
3
companies

Households’ being served Almost 11 crores

Population Covered About 50%
Target for 2015 5.5 crore new connections
Increase targeted +25%
Demand for LPG in 2007-2008 10178 TMT
Demand for LPG in 2009-10 12746 TMT
Indigenous Production in 2009 – 10 10323 TMT
Supply level 11278 MMTPA
Supply by PSU OMCs 55%

Supply by private players (Essar and RIL) 25%

Supply by other importers 20%
Standing of supply of demand in 2004-2008 90-95%

Number of distributors in 2007 9366

24 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
LPG Distribution in India

LPG is available across urban and semi urban areas of the country. As of
October 2009, at the start of the RGGLV scheme, 83% of LPG network is in urban
areas, while only 17% is in rural areas (PIB, 2009). This provides the magnitude of
the challenge in ensuring availability of LPG as a cooking gas in rural India. The
rural India is predominantly not covered currently and the scale of the challenge will
magnify if coverage has to be ensured to the entire country.

The OMCs have been doing their best in ensuring the availability of the LPG
across India. The Table 4 shows the LPG connections in lakhs. There were 122.73 lakh
connections in India issued by the three main OMCs in 2011 – 12 and in the first 6
months of the current financial year (2012 – 13) they have already offered 63.15 lakh
new connections. LPG currently is made available to 15.43 crore households in India
as on July 2013.

TABLE 4: Number of LPG Connections issued by Public Sector Oil Marketing Companies

2012-13 April
OMC 2009-10 2010-11 2011-12 to October,
2012
IOC 41.63 46.80 57.55 31.77
BPCL 19.29 28.40 31.54 14.64
HPCL 25.29 28.97 33.64 16.74
Total 86.21 104.17 122.73 63.15
(OMCs) in India (2009-10 to 2012-13-upto October 2012) (In Lakh)
Source: www.indiastat.com

This poses a huge logistics challenge to the stakeholders involved in the LPG
market in India. Another reason for urgency in extending LPG coverage in rural areas
is more social and health based to eliminate the negative impact of ailments due to
use of polluting energy sources contributing to breathing problems. Government has
launched Rajiv Gandhi Gramin LPG Vitrak Yojana (RGGLV) to address the energy
security in rural India. The scheme also provides employment opportunities for the
rural population contribution to economic prosperity.

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 25

LPG Distribution in Rural India

LPG is a primary cooking medium in the urban India and is available to 88%
of the families. The rural availability in contrast is very low at around 20% with the
overall average in the country at 45% (See Table 5).

TABLE 5: Lpg Penetration in Domestic Sector

Urban Rural Total

Population in Million 326.2 838.8 1165
Households in Million 95 159 254
LPG Connections in Million 83.8 31.2 115.0
Penetration of LPG 88% 19.6% 45%
Source: http://petrofed.winwinhosting.net/upload/Apurva_Chandra.pdf, Downloaded on April 9, 2013

The rural India is dependent on alternate fuels which are energy inefficient,
environmentally pollutions and health risks for the women in the family. The Indian
household use of various cooking fuels is given in Figure 1.

Figure 1: Indian Household use of cooking fuels (as per Census 2001)

Source: http://iei-asia.org/IEIBLR-Cleancooking-Presentation.pdf, Downloaded on September 14, 2013

The benefits of LPG are not available to rural India, since distribution of Liquefied
Petroleum Gas (LPG) to rural areas has administrative and logistical challenges. The
Government of India launched the Rajiv Gandhi Gramin LPG Vitarak (RGGLV)
scheme on 16th October, 2009 with focus on addressing the challenges in retailing and
distribution of LPG in rural areas. The Government of India is implementing RGGLV
scheme which targets the rural India both for providing energy security and also for
increasing employment and income avenues.

26 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
Challenges in LPG Distribution

Demand supply scenario in India for LPG is skewed (See Figure 2) and the
state has a responsibility to ensure equitable distribution of the resources in Urban
and Rural India. The companies, both public and private, have responsibility of
ensuring supply of LPG at subsidized price to each and every house. Managing the
supply chain of the LPG business, which involves storage, retailing and distribution
processes are a huge challenge. Marketing of LPG, has unique challenges because of
the fact the product cannot be seen either by the producer neither the consumer. The
perception of LPG in rural India also needs to be addressed, since the consumer has
to accept the reliability, safety and timely availability. The market segment consists
of Domestic, Commercial and Industrial segment and the marketing as well as the
pricing policies varies accordingly. One of the biggest challenges of the business of
LPG distribution is the illegal diversion of the cylinders from the Domestic segment to
the Commercial and Industrial segment, due to the subsidized price of Domestic LPG.
The dealer level motivation for illegal diversion is sought to be addressed through
the direct benefits transfer (DBT) mechanism using the AADHAR card scheme. The
challenges in the implementation of the DBT are many, but are not directly related to
the LPG availability in rural India.

Figure 2: Demand and Availability of LPG in India

Source: http://petrofed.winwinhosting.net/upload/Apurva_Chandra.pdf, Downloaded on April 9, 2013

The use of alternative cooking mechanism like induction and microwave

cooking which use electricity is increasing the Urban India and the rural India is still
predominantly dependent on coal, dung cakes and wood. This results in dynamic
competitive environment. The threat from one of the most potent substitute of LPG,
Piped Natural Gas (PNG) has to be understood. The PNG is promoted as an alternative
to the LPG in ensuring energy security in India. The shift thought gradual is significant

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 27

as can been seen from the LPG connections surrendered due to the availability of
PNG. Though LPG is a more efficient fuel than Natural gas (higher calorific value),
the advantages in case of Natural gas outweighs the LPG. Until the infrastructure for
distribution of Natural gas is present, LPG will continue to be in existence, though to
ensure viability the abolition of the subsidy regime needs to be considered.

LPG Marketing

The responsibility of ensuring the availability of the LPG to the different market
segments is with the public sector OMCs. They are facilitators in the development
of India and operate according to the policy directions of the oil ministry. Table 6
provides a trend in the marketing of LPG over the last decade in terms of the number
of customers, consumption in TMT, the numbers of distributors, the bottling capacity,
etc. It captures the increasing complexity and scope of the LPG marketing in India
and provides a glimpse of the challenges to be addressed in making LPG available to
rural India.

TABLE 6: GROWTH IN LPG MARKETING IN INDIA (2001-2002 TO 2011-2012)

2011-12*
2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11
Head Unit

Consumption
(TMT) 7728 8351 9305 10232 10456 10849 12010 12191 13135 14332 15367
(PSU/Pvt.)

LPG Customers
(Lakh) 635 700 772 845 891 949 1018 1068 1163 1269 1387
(PSUs) @

LPG Distributors
(Nos.) 7486 7910 8325 9001 9270 9363 9365 9366 9686 10541 11489
(PSUs) @

LPG Markets
(Nos.) 3209 3438 3669 4105 4288 4359 4393 4420 4599 4866 4990
(PSUs) @

Enrolment (Lakh) 60.75 67.1 78.1 73.0 46.6 53.8 64.9 53.2 86.2 104.2 122.7

Indigenous
Production (PSU/ (TMT) 6983 7273 7668 7810 7710 8454 8868 9170 10336 9623 9604
Pvt.) of which

a. Refineries (TMT) 4778 4903 5348 5570 5525 6315 6732 6996 8091 7541 7335

b. Fractionators (TMT) 2205 2370 2320 2240 2185 2093 2060 2162 2249 2168 2213

28 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
Imports (PSU/
(TMT) 659 1073 1708 2334 2883 2278 2833 2360 2718 4484 5035
Pvt.)

Bottling Capacity
(TMTPA) 6263 6840 7402 7702 8122 8448 8697 8967 11569 11889 12723
@

@ : Year End Position. * : Provisional.

Source: www.indiastat.com

Some of the characteristics peculiar to the competition among OMCs are:

i. No scope for Price war
ii. Dealership and regulations
iii. OMC-PMC competition
iv. Market structure

LPG for domestic customers is supplied at a subsidized rate and for industrial
& commercial rate is market determined. This difference in pricing scheme often
lead to black marketing but companies are vigilant to inhibit this practice. HPCL is a
pioneer including GPS device in its cylinders to restrain the fraudulent practice.

Share of bottling plants

IOCL leads the market with 49% share, followed by 27% by BPCL & NRL, and
23% by HPCL. In the PMCs, major players are RIL and Essar. These two companies
generate 90-95% of their revenue from the Commercial and Industrial segment. The
combined LPG producing capacity of RIL & Essar is 3% of the total indigenous LPG
production capacity of India.

The number of dealerships of a company is decided by the committee

in accordance to their market share and presence in the region. Hence, chances of
competition for market share in domestic segment are also very limited. Though, in
industrial segment, with lack of price regulation and hence better scope for margin
there is an intense competition in the form of Price, Service, Promptness in delivery,
and Hours of catering or working hours.

Private Oil Marketing Companies due to subsidized price prevailing in the

domestic segment has not shown any interest to compete with the OMCs, but, in
industrial segment the competition is more intense.

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 29

Government and LPG Marketing

With an increase in the demand and supply for petroleum and natural gas
products, and with multiple new players entering the market, the Indian government
has enacted the Petroleum and Natural Gas Regulatory Board Act, 2006. The objectives
of the act are to promote competition among entities; avoid infructuous investment;
maintain or increase supplies; secure equitable distribution; and ensure adequate
availability of petroleum, petroleum products and natural gases nationwide.

LPG business is ruled by the domestic clients, the subsidy regime doesn’t
allow the companies to make profit from this division. Industry and commercial
segment provides the revenues but not enough to compensate for the losses made in
the domestic segment. Thus, the LPG SBU is a loss making unit. Internal marketing
is important to orient the distributors, who are the interface between the consumers
and the company, to act in accordance with ethics and see that there is no diversion of
cylinders. This arbitrage incentive is due to the fact, that domestic cylinders are priced
low and hence commercial enterprises have a tendency to acquire those at a premium,
though lesser than the designated commercial LPG product. Several steps are taken
by the Government of India and OMCs to prevent diversion of domestic cylinders to
ensure that the spirit of LPG subsidies is not misused.

Rajiv Gandhi Gramin LPG Vitarak Yojana

The RGGLV is introduced to make LPG available in rural areas. RGGLV as per
the government calculations will be sustainable for cluster of villages having about
4000 families. RGGLV will be setup for a group/cluster of villages having a potential
of average monthly sale of 600 cylinders (refill sales) per month of 14.2 kg and 1800
customers considering monthly per capita consumption of 5 Kg. Proprietor along
with one staff will operate the RGGLV agency. The agency would have a smaller size
LPG storage godown than a normal distributor. Both LPG godown and showroom
will be located close by. The godown would be sufficient to store minimum 300
filled cylinders to accommodate full truck load i.e. license capacity of about 5000 Kg
LPG as against present size of 12000 kg for urban distributors and 8000 kg for rural
distributors. A small showroom of the size 2.6 m X 3 m can be constructed near the
godown outside the safety zone or in an existing nearby shop. LPG cylinders (14.2 kg
Refills) will be supplied to the customers on Cash and Carry basis with no rebate.

30 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
Objectives of the scheme

The scheme aims to make LPG available in rural areas and ensuring a
convenient fuel for rural household and have a check on black marketing of LPG in
rural areas.

Framework and collaborations

The agencies under the RGGLV will be of small size requiring lesser finance/
infrastructure. These agencies will be viable with monthly refill sales of 600 against
2,500 at present. The agencies will be able to penetrate deeper into the rural areas
where regular distributorships become unviable due to the scale of operation and
investment. These agencies will be self-operated and will not have any arrangement
for home delivery.

The likely capital expenditure for setting up of a new RGGLV distributorship

will be about Rs. 3.21 lakh with land measuring 20 meter X 24 meter being owned by
the candidate being an essential requirement. The distributor will be able to recover
the capital expenditure by the time 1,800 new LPG connections are released. The
indicative net income of the distributor will be about Rs. 7,500 per month.

Phases of scheme

1. In the first phase, IOC advertised for 576 locations in eight states for appointing
RGGLV.

2. The second phase of RGGLV in 6 states for 951 locations have been advertised
in March, 2010. Third phase of 62 locations in the North Eastern states have also
been advertised.

Goals of RGGLV

As per the “Vision-2015” adopted for the LPG sector, target of overall 75%
LPG population coverage has been fixed. However to ensure that growth of LPG usage
is evenly spread, Oil Marketing Companies will be assessing/identifying location
under the new scheme in rural/low potential areas in all States/Union Territories so
as to achieve target growth of at least 50% LPG population coverage in each district
and at least 60% overall LPG coverage in each State over the next five years.

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 31

Performance evaluation of RGGLV scheme

The targeted LPG dealerships under this scheme are 3786 with almost equitable
distribution across different states of India. Uttar Pradesh, the biggest state of India,
has the largest targeted RGGLV dealerships with 587 (15.5%), followed by Bihar with
411 (10.86%) and West Bengal with 353 (9.32%). The importance associated with the
RGGLV dealerships for energy security may be gauged by analyzing the percentages
of RGGLV dealerships with the regular LPG dealerships. The top 5 states with high
percentages of RGGLV dealerships are Bihar (24.93%), Rajasthan (24.48%), Jharkhand
(22.67%), Chattisgarh (18.12%) and Orissa (18.09%) compared to a national average of
10 percent as on 01.02.2012. The detail of the state-wise RGGLV distributors is provided
in Table 7. 21 states and union territories however have no RGGLV distributorship as
on 01.02.2012. These are primarily union territories and smaller states or urban areas
with Punjab, Haryana and Kerala being the exceptions.

TABLE 7: State-Wise Number Of Lpg Distributorships Planned To Be Set Up In India

(2012-2013 TO 2014-2015)

No. of RGGLV
States/UTs
Distributorships

Andaman and Nicobar Islands 2

Andhra Pradesh 201
Arunachal Pradesh 15
Assam 118
Bihar 411
Chandigarh 0
Chhattisgarh 36
Dadra and Nagar Haveli 0
Daman and Diu 0
Delhi 0
Goa 0
Gujarat 73
Haryana 109
Himachal Pradesh 39
Jammu and Kashmir 65
Jharkhand 235

32 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
 Karnataka 137
Kerala 99
Lakshadweep 0
Madhya Pradesh 152
Maharashtra 212
Manipur 21
Meghalaya 12
Mizoram 19
Nagaland 13
Odisha 206
Puducherry 1
Punjab 127
Rajasthan 258
Sikkim 5
Tamil Nadu 207
Tripura 16
Uttar Pradesh 587
Uttarakhand 57
West Bengal 353
India 3786

Source: www.indiastat.com

One of the objectives of RGGLV is economic development of the family in the

rural India. This is sought to be assured through co-ownership of the distributorship
by the husband and wife. However the economic security is a result of the income
achieved legally through the LPG agency of the distributor. The distributor
commission is a main source for income. Though it is growing over the years, the
increasing costs of transportation from the agency to the consumer and the cost of
maintaining the agency has increased the call from dealers of more commission. The
trend in commission increase is provided in Table 8.

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 33

 TABLE 8: Distributor Commission on Liquid Petroleum Gas (Lpg) in India

(Rs./Cylinder)
LPG
Effective date
14.2 Kg. 5 Kg.
As on 01-April-04 16.71 8.60
1-Mar-07 19.05 9.81
4-Jun-08 20.54 10.58
30-Jun-09 21.94 11.30
07-Oct-12 37.25 18.63

Supply Chain of LPG

Managing the supply chain of the LPG business, which involves storage,
retailing and distribution processes, is a huge challenge. The agency has to train and
educate the consumers and ensure the reliability, safety and timely availability of the
LPG. Another supply chain challenges is the illegal diversion of the cylinders from the
Domestic segment to the Commercial and Industrial segment, due to the subsidized
price of Domestic LPG. Though the dealer level motivation for illegal diversion is
sought to be addressed through the direct benefits transfer (DBT) mechanism using
the AADHAR card scheme, the challenges in the implementation of the DBT are
many. The rural India, which is not enrolled into the structured banking services
significantly, will have more difficulties in the implementation of this scheme.

Supply of LPG cylinders form refineries to the bottling plant and then to
distributors is complex. In India, LPG is either imported from outside or is produced
as a by-product in the refineries and petrochemical plants. Imported LPG arrives at the
country’s ports by help of LPG tanker ships. From both the ports and the refineries,
LPG is brought to the large storage facilities with the use of pipelines. From the storage
facilities, LPG is directly distributed to bulk industrial purchasers via large bulk road
tankers. For the domestic customers, LPG is distributed in packed form through
dealers. Dealer holds the stock of filled cylinders. When the customer’s LPG cylinder
is emptied, it is replaced by the local operating dealer at the customer’s location itself.

Indian OMCs have time tested networks to supply LPG up to their bottling
plants and urban areas, but distribution in the rural areas is still questionable. The
safety of the highly volatile product being distributed in cylinders and tankers across
underdeveloped basic infrastructure is a challenge. The road network in India is

34 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
second largest in the world at 33 lakh Km. About 65% of freight and 80% passenger
traffic is carried by the roads. National Highways constitute only about 1.7% of the
road network but carry about 40% of the total road traffic. With more than 26 lakh
kilometers of rural roads the quality of the road network is not very good and is a
challenge for LPG distribution. The rural areas especially in India have challenge of
poor infrastructure. The road and rail connectivity from one place to other place is
difficult. Storage with distribution point is another problem area for high safety needed
products like LPG. The pipelines are another mode of distributing the gas. Figure 3
provides the existing and proposed pipe line connections for gas distribution. The
refineries will be distributed across different parts of the country and well connected
through pipe lines. This mode of distribution may address the problem of poor road
connectivity to some extent but the implementation has to be timely and sufficient
quality.

CONCLUSION

The energy security of the rural areas is sought to be ensured through the
RGGLV scheme and in the urban areas through the PNG model. The ambitious
proposal of the central government suffers from implementation challenges,
primarily related to entrepreneurial initiative to open RGGLV distributorship at
targeted locations. Distribution of Liquefied Petroleum Gas (LPG) to rural areas is a
logistical challenge. The focus of this scheme is to address the challenges in retailing
and distribution of LPG. Demand supply scenario in India for LPG is skewed and the
state has a responsibility to ensure equitable distribution of the resources in Urban
and Rural India.

RGGLV is being administered with help of three Oil Marketing companies

(IOCL, BPCL and HPCL). The norms and procedure for appointing distributors have
been framed by ministry. The OMCs have been given responsibility of ensuring
distribution to every corner of rural India. However, identifying of the distributors,
training them and implementing the LPG distribution is a challenging task which
may be seen from the variances in the targets and results discussed above.

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 35

REFERENCES
• Brochure on Selection of Rajiv Gandhi Gramin LPG Vitrak (RGGLV), issued by Minstry
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36 Ensuring Energy Security In Rural India – A Case Study on Rajiv Gandhi Gramin LPG Vitrak (RGGLV) Yojana
 • URL http://pib.nic.in/newsite/efeatures.aspx?relid=98430 Accessed on November 16, 2013
• URL http://petrofed.winwinhosting.net/upload/Apurva_Chandra.pdf Downloaded on April
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2013

Sona Global Management Review | Volume 9 | Issue 3 | May 2015 37

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