WITH international crude oil prices surging to over $100 barrel due to the ongoing conflict in West Asia, gas shortage is slowly hitting commercial users of cooking gas or LPG, especially restaurants, in big cities like Mumbai, Chennai, Hyderabad, and Bengaluru, and industrial users of LNG and propane-LPG such as tile and ceramic makers in Morbi, Gujarat.
Refiners and fuel retailers have been asked by the government to prioritise domestic LPG supply to households over commercial users, which has led to some tightness in certain pockets. Further, the Petroleum and Natural Gas Ministry said supplies from imported LPG are being prioritised to essential sectors such as hospitals and educational institutions.
The government has also raised the minimum waiting period for booking a LPG cylinder to 25 days from 21 days to avoid hoarding and black marketing. Further, to review the representations for LPG supply to restaurants, hotels and other industries, it has set up a committee of three executive directors of oil marketing companies.
Despite crude oil topping $100 a barrel, the highest in three-and-a-half years, the officials said there were no plans to increase retail prices of petrol and diesel for the time being. This is in line with the government’s policy to keep pump prices stable notwithstanding the volatility in international energy markets, they said.
The fuel retail market in India is dominated by state-owned refiners and retailers Indian Oil, BPCL and HPCL, which together have a market share of 90%-plus.
The government also invoked emergency powers derived from the Essential Commodities Act to direct refiners to maximise LPG production and ensure all supplies to domestic LPG consumers.
The official, who spoke on the condition of anonymity, reiterated that there are sufficient stocks of crude oil, petrol, and diesel in the country for the time being, and there is no cause for panic. Last Tuesday, government sources had indicated that India had six-eight weeks of crude and fuel stocks, which would be replenished on an ongoing basis by increasing supplies from other regions. As refineries continue to process crude, produce fuels, and get more oil from regions other than West Asia, these stocks will keep shifting, and the effective coverage would be extended, they had said.
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With crude oil prices surging past $119 a barrel for the first time since July 2022 when surge in post-pandemic oil demand met with supply constraints due to Russia’s invasion of Ukraine, benchmark stock indices tumbled nearly 3 per cent in early trade on Monday. The market recovered some ground as oil prices eased from their highs, but still ended the day down 1.71 per cent, erasing more than Rs 8.5 lakh crore in investor wealth. Stock indices have fallen 5.69 per cent since the war between US-Israel and Iran started on February 27.
The rupee also fell to a record low of 92.32 against the dollar, a decline of 58 paise as the rising crude oil prices impacted the forex market sentiment. Despite the RBI support, the rupee has fallen 2.62 per cent since January 1 this year.
Morbi in Gujarat, which has more than 1,800 ceramic and tile manufacturing units, has been hit hard by the gas shortage. “About 150 of 650 units have shut down, but others are still receiving supplies. The exact condition of Propane stocks for industrial use is not yet certain,” said Haresh Bopaliya, President of the Wall Tiles division of the Morbi Ceramics Manufacturers Association.
A major propane trader who supplies to many ceramics players said 70% of imported propane comes from Qatar through the Strait of Hormuz. “This is not possible at the moment. A lot of the propane-LPG is for households and it’s only the excess that is then supplied to the industry. The current fuel shortage has caused massive disruption. In the first week of March, some ships carrying propane were still arriving or had just arrived at ports, so supplies have still continued. It is not clear now,” the trader said.
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In Mumbai, Vijay Shetty, President of Indian Hotel and Restaurant Association (AHAR), which has about 8,000 restaurants in its Whatsapp group, said, “The shortage came to light on Friday, and it is becoming challenging day by day.” He said he has already written to Petroleum Minister Hardeep Puri.
In Bengaluru, PC Rao, President, Bruhat Bengaluru Hotel Owners Association, said around 25-30 hotels in the city were impacted as supply of direct gas stopped Monday. “Oil companies had said there would be no disruption in gas supply for up to 70 days. The sudden suspension has caused a major blow to the hotel industry,” he said. Diwakar R, a restaurant owner in Bengaluru said, commercial cylinders were billed at Rs 1,958, but sold in black for up to Rs 2,500.
Top hotels in Hyderabad too said an LPG shortage is looming. “Since the past four days, supplies have dried up,” a restaurant owner said. At least 10 hotels this newspaper contacted complained of LPG shortage and rising prices in the black market.
As far as petrol and diesel is concerned, government officials said it is unlikely prices will rise. These have effectively been flat since April 2022, with the public sector oil retailers taking losses when global prices jump, and recouping them when they fall. “The OMCs have done well financially over the past few years and they are in a comfortable position to take some temporary pain to protect the consumer from high energy prices,” said a senior government official. A continued freeze in prices is expected to blunt the inflationary impact of the oil price spurt.
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With inputs from Heena Khandelwal in Mumbai, Brendan Dabhi in Ahmedabad, Kiran Parashar in Bengaluru and Nikhila Henry in Hyderabad
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