Change in Cooking Gas Policy: Blessing in Disguise for RIL

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Reliance Industries Limited (RIL) led by MukeshAmbani will soon venture out in the domestic cooking gas (LPG) retailing market. This market of cooking gas was occupied by three state-owned oil companies till now. With the recent policy change of providing nine-cylinders-a year cap on subsidized rates, have made room for private –sector companies like RIL to enter this area. This is a profitable option for private energy companies to provide non-subsidized cooking gas (LPG) to Indian households.

Reliance is based on the vision to try out every opportunity that makes sense for its profitable growth. This one might be on those opportunities for RIL to just bag it at the right time. For Reliance to start pan-India operations, it requires a huge dealership network and basic infrastructure. By supplying small quantities of auto and industrial LPG in Gujarat and Maharashtra, RIL has already started to test and study the market nature. The pre-test in these two states before starting full –fledged operations of providing domestic cooking gas across the country will help Reliance to chart out a proper strategy.

The entry of private-owned companies in public sector will infuse a sense of competition amongst market owners. This competition amongst suppliers of the non-subsidized cooking gas market will help to bring down the prices of gas cylinders. In the end, this price competition amongst public and private players will be beneficial to the consumers.

At present, as per the new cooking gas policy each household will get nine cylinders at a price of INR 410 for a year. If the consumption of gas cylinders exceeds more than nine, the gas cylinders will be available at a price of INR900 for 14.2 kg.So, if any privately owned company starts to sell non-subsidized gas cylinders, it can sell cylinders at a discounted rate as per to the International market prices in order to increase market share.

Reliance has a big opportunity to capture the domestic cooking gas retail market. Apart from this, RIL is also focusing on increasing its production of natural gas and petroleum found from the reserves of KG-D6 basins located in Bay of Bengal. It is deepening its current reserve blocks and also searching for new reserves so that the demand and supply balance can be achieved. Reliance along with its European partner BP is planning to invest $5 billion for the expansion of these reserve blocks over the next five years. The vision of MukeshAmbani, Chairman of Reliance Industries Ltd is to make India fully self-sufficient to balance the demand and supply with the help of indigenous resources. It is a step to make India import-independent.

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