India’s extension of free LPG cylinder refills to PMUY to boost Q3 LPG consumption – traders
India could see a renewed appetite for LPG imports after the government approved on July 8 to extend the provision of free LPG cylinder refills for Pradhan Mantri Ujjwala Yojana, or PMUY, beneficiaries, traders and market sources said July 9.
A nationwide lockdown that began on March 25 to curb the spread of the coronavirus had affected the livelihood of many lower income households in India, and around 80 million households under the PMUY were entitled to three free 14.2 kg LPG cylinders from April 1 to June 30, Platts reported earlier.
The giveaway was intended to discourage households, especially those living in the rural areas, to switch back to using freely available biomass and woodchips as fuel for cooking.
The July 8 announcement was unexpected, market sources said, as the Indian government had earlier said it would not be extending the PMUY scheme beyond June.
In its latest statement, the government said the scheme will be extended by another three months till September 30.
“Not all rural households have adequate access to these cylinders, some households consume less than one cylinder a month, so many PMUY beneficiaries have not fully utilized their quotas,” an Indian LPG importer said July 9. “The extension is meant to help those who have not fully benefited from the scheme.”
Domestic LPG consumption falls below expectations
Indian LPG imports surged in the second-quarter, as state-owned refiners Indian Oil Corp., Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd sought an additional 776,000 mt of spot LPG for delivery between April and June at end-March and early April.
Domestic demand for the cooking fuel was expected to spike over the same period to meet the estimated increase in demand from the LPG giveaway.
However, India has had to cancel multiple LPG cargoes for May and June arrival with suppliers in the Middle East amid reports of high inventories after over-estimating what amounted to only a modest increase in LPG consumption over April and May, Platts reported earlier.
India imported 1.508 million mt of LPG in May, up 9.5% from April, and the highest in eight months, while consumption rebounded 8.7% to a four-month high of 2.32 million mt, the latest data released by the Petroleum Planning and Analysis Cell, or PPAC, showed on June 22.
PPAC is expected to announce India’s LPG imports and consumption for June next week.
India pauses spot imports for several months on high stocks
“Although LPG consumption in the country was expected to rise 16% year on year in the month of June based on our estimates, [it did not] mainly due to June being a slow month in terms of historical consumption. So you are comparing against a smaller base,” an Indian LPG producer said.
Meanwhile, active buying of cargoes for delivery over April to July kept India well covered till August, and market sources had earlier said that India’s LPG importers would resume spot imports only over August-September.
“In absolute terms, the increase in household consumption from the government incentive scheme has been modest, and inventories remain high. We expect to see a gradual drawdown of stocks to pre-lockdown levels only from middle of July, and import demand to resume end-August,” the source added.
The shipping community has echoed the same, with Gibson shipping brokerage reporting a 22% year-on-year increase in India’s LPG imports with a lengthy waiting time of more than 10 days on average in June.
As many as 15 LPG carriers were reportedly waiting to discharge in the first week of July, the report said.