Clean Fuel Policy in India Raises Demand for LPG

Posted by Kayrros


After India announced its new clean fuel policy, the demand for kerosene dropped while the demand for Liquefied petroleum gas (LPG) increased

The demand for kerosene in India has remained stable since it dropped two years ago after the announcement of a new government policy in May 2016. The policy encourages the use of LPG as a cleaner cooking fuel option by offering free connections in rural areas.

Kerosene competes with LPG in rural Indian markets for both commercial and residential applications, so the government subsidies have affected the access and demand of LPG directly. The two forms of kerosene used in India are Aviation Turbine Fuel (ATF) and Superior Kerosene Oil (SKO).

 An LPG connection is a government subsidized program meant to provide heating and cooking resources to impoverished families. An LPG canister or cylinder weighs 14.2kg when full. The first cylinder is provided free of cost for people who have an income below the poverty line. The refill of the cylinder is provided at a subsidized rate and the payment of refill can be done in monthly installments.

The Kayrros forecast shows a larger increase in LPG demand in Q2 2018 as compared to kerosene demand.

The Kayrros forecast predicts a slight decrease for kerosene demand in Q1 2019 as compared to a constant, larger increase for LPG demand in the same quarter.

Aside from Indiathe Kayrros forecast shows the demand for kerosene will increase in other monitored countries in the next few months due to an increase in global air traffic.
Kayrros observed an opposite trend from India in Mexico. Forecasts showed a similar increase in kerosene demand in Mexico during May and June. Kerosene demand will further increase in Q2 2018, while LPG demand will decrease in Q2 2018.

The decrease in LPG demand in Mexico comes from competition with natural gas. New pipelines in Mexico give access to natural gas in many new regions. According to EnergySecretariat (Sener) estimates, cooking accounts for about 60% of the country domestic demand.

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