Setback to non-state marketeers: Domestic lPG cannot be sold

In a setback to non-state lPG marketeers, the government's top law officer has ruled that all domestically produced cooking gas (lPG) should necessarily be sold to PSUs for subsidised sale to consumers.

Ranjit Kumar, Solicitor General of India (SGI), the nation's second highest law offer, has upheld oil ministry view that sale of lPG by domestic producers to anyone other than state-owned oil marketing companies (OMCs) is not permissible under lPG Control Order.

In his opinion on a query by the ministry, he said non-state lPG sellers, called parallel marketeers, cannot source the fuel from domestic refiners. They have to import lPG if they intend to sell the cooking fuel in domestic market.

Sources said Kumar in his opinion upheld ministry's view that parallel marketeer's distribution/sale in the domestic market could only be of imported lPG subject to conditions prescribed in the lPG Control Order.

While India is surplus in refining capacity, it does not produce enough lPG to meet all of its demand. lPG is produced by both public sector firms like Indian Oil Corp (IOC) as well as private firms like Reliance Industries. This lPG is sold to consumer mostly through distributors appointed by government at subsidised rates.

Reliance Industries, the largest single location lPG producer in the country, had last year contested the ministry view saying rules do not mandate that all domestic lPG must be sold only to state firms. It had allegedly sold the cooking gas produced at its Jamangar, Hazira and Patalganga plants to retail customers.

Sources said the SGI on ministry's query on what action should be initiated against those lPG producer who had sold lPG in parallel market, said the action should be in accordance with the law.

Kumar stated that parallel marketers were allowed to sell lPG sourced from domestic refiners from 2005. And so, they should be first given a notice/warning that they cannot sell domestically produced lPG to the consumer directly and action as per law may be taken only if they do not adhere to the notice/warning.

The SGI said the lPG Control Order of 2000 defines parallel marketeer as someone who is carrying on business of importing, storing, transporting, marketing and distributing of lPG. It does not prohibit the parallel marketeer from producing lPG but it cannot sell such production directly to consumers.

The lPG Order nowhere permits the domestically produced lPG to be sold by a parallel marketeer, who is a person other than a government oil company, and that such parallel marketeer could only distribute/sell imported lPG.