The Indian government is giving away free LPG to poorer consumers as part of a 1.7 trillion rupees ($22bn) stimulus package to counter the economic impact of the coronavirus outbreak, likely boosting demand and imports of the fuel.
India will provide up to three refills of 14.2kg LPG cylinders to 83mn poor households over the next three months. The refills will be available to users who are eligible for LPG supplies under the government's PMUY subsidy programme, which has been running since 2016.
The stimulus package is designed to support the economy after India declared a 21-day nationwide lockdown from 25 March to 14 April to stem the spread of coronavirus.
The lockdown could be expected to boost demand for LPG, which is mainly used as a cooking fuel, by forcing more people to prepare meals at home. But there are indications that supplies of LPG cylinders are being disrupted as workers stay home and police crack down on people on the streets, including truckers and delivery boys.
The closure of huge parts of the economy also threatens to all-but eliminate LPG buying by poorer consumers, who typically work as daily labourers and may be left without wages, prompting the government to offer free refills.
Sales of packed LPG to households account for around 87pc of all LPG sold in India. The remainder is used for autogas and by businesses consumers.
The PMUY programme is designed to encourage poorer households to stop using firewood as a cooking fuel. It provides a government grant for LPG connections and a zero-interest loan to buy a stove and a first refill of the fuel. The programme has helped expand the use of LPG to 96pc of all Indian households, up from just over 50pc six years ago. But refill rates in PMUY households average just 2-3 cylinders a year, less than half the level at many urban households, as high LPG prices have led poorer users to switch back to burning wood.
All Indian households, including those in the PMUY programme, are allowed 12 subsidised 14.2kg cylinders of the fuel every year.
Indian state-controlled refiners such as IOC and BPCL are preparing to increase output of LPG to meet higher demand. But any production is likely to fall short of the rise in demand and may lead to an increase in imports.
India produced 1.12mn t of LPG in February and imported 1.34mn t. Demand was 2.11mn t, down from a record high of 2.45mn t in January. That left imports accounting for 64pc of demand last month.
India cut prices of non-subsidised LPG for March by around 6pc from February, halting six consecutive monthly increases. Prices are at Rs805.50 for a 14.2kg cylinder in Delhi, down from Rs858.50 in February.
The government announced the 21-day lockdown in an attempt to stop the rise in coronavirus cases. Official figures show nearly 700 cases with 17 fatalities. The Indian economy is now likely to grow by just 2.5pc in 2020, down from an expected 5.3pc before the outbreak, ratings agency Moody's said.
