India’s demand for liquefied petroleum gas (LPG) rose to a record in the fiscal year ended in March amid government measures to provide cleaner cooking fuel to rural households, and analysts expect consumption to keep rising.
About two-thirds of India’s population live in rural areas, typically using firewood, coal or dried dung cakes for cooking.
India consumed a record 24.9mn tonnes of LPG in the financial year 2018/19, 53% higher than five years ago, and 6.9% higher than the previous year.
The boost follows a social welfare programme, known as the Ujjwala scheme, launched by the government in 2016 that has provided about 72mn new LPG connections to households in 714 districts, according to official data.
“Supported by government policies, mainly through the ‘Ujjwala Scheme’ and a rising middle class population, LPG penetration in Indian rural areas has been extremely robust,” Sri Paravaikkarasu, director for Asia oil at energy consultancy FGE, said in an e-mail.
Amid the Ujjwala programme, close to 80% of Indian households have access to LPG as of the end of 2018, up from 56% in 2016, according to FGE.
“Favourable government policies will support LPG demand to increase strongly in coming years,” said Paravaikkarasu, adding her consulting firm expects LPG demand grow by 8% in 2019 and 6.7% in 2020.
Growing LPG consumption has kindled a surge in India’s imports of the fuel, and analysts expect this trend to intensify. India imported 13.2mn tonnes of LPG in the year to March 2019, a record high and more than double the import volumes in the 2013/14 financial year. Imports were 15.9% higher than the previous year.
“The phenomenal growth in LPG usage will reduce India’s self-sufficiency of LPG to 42% in 2025 from about 70% in 2013,” said Aman Verma, a research analyst at Wood Mackenzie.
“An additional 5mn tonnes per annum of import terminal capacity is being built and supposed to be completed by FY 2020-21 in order to meet the demand,” Verma added.
Indian consumers have used the LPG to erode kerosene’s role as a cooking fuel in the country.
India’s kerosene sales plunged 10% during 2018/19 to 3.5mn tonnes, less than half of the 7.2mn tonnes sold in 2013/14.
Kerosene is sold in India via public distribution shops operated by the government at subsidised rates.
“While we expect the downtrend to continue, kerosene demand should not fall off the cliff hereafter, as it should stabilise at 50,000-60,000 barrels per day baseload levels,” FGE’s Paravaikkarasu said.
That is equal to between 2.3mn to 2.8mn tonnes per year, according to Reuters calculations.