When popular shampoo brands started selling sachets, they managed to rope in a consumer with small pockets but big aspirations. Small soon became big in the FMCG industry, with everything from coffee to chips and shampoo to cream being sold in single-use packing costing not more than Rs 5, thus reaching buyers who could never afford the larger packs.
With fuel costs spiraling, the LPG cylinder has also taken on a ‘Chhotu’ 5-kg avatar that is more in demand than the standard 14.2 kg version. Even if the small cylinder costs a bit more, it makes sense for many who can’t shell out Rs 900 in one go but would prefer to commit Rs 500 for the small one instead.
The uptake of small cylinders would probably grow further if the government’s plan to supply these through the network of fair price shops across the country kicks off. And with no subsidy in sight for LPG, more consumers would be forced to opt for the smaller ones.
State-run oil marketing companies are said to have appreciated the proposal of retailing through fair price shops, and have even committed their support. The consumer affairs ministry had requested the Union ministry of petroleum and natural gas for leveraging electronic point of sale (ePoS) devices for sale of 5 kg small cylinders from fair price shops. “We are looking into the business model and a pilot has been started in Kerala,” state-run Indian Oil Corporation Ltd (IOCL) told FE. “As per preliminary discussions and business model proposed, the retail sale price of small cylinder at FPS will be same as market price,” IOCL added.
As for IOCL, the 5 kg small cylinder is primarily marketed to cater to the needs of customers such as migrant labourers, students, food hawkers who were dependent on the grey market due to lack of address proof, etc. The sale of these small cylinders recorded a significant jump in FY20 after it was re-launched under the ‘Indane Chhotu’ brand name in December, 2020. Sales grew further in FY21 when subsidies on standard 14.2 kg domestic cylinders were stopped.
To encourage regular refill, a swap option from the standard 14.2 kg connections to 5 kg connections was offered to Pradhan Mantri Ujjwala Yojana (PMUY) consumers.
As FE reported earlier, of the eight crore PMUY beneficiaries, 3.2 crore did not refill their LPG cylinders in the first quarter of FY22. The government not paying any subsidy on LPG since May 2020 has led to rural households spending nearly 10% of their monthly expenditure on the cooking fuel, a recent study by the Council on Energy, Environment and Water (CEEW) has said. The report, released in September, said 85% households in the country have LPG connections, and 80% of the non-user households cited affordability issues for not having an LPG connection.
A drop in global crude oil prices, and hence global LPG product prices since May 2020, gave the government an opportunity to withdraw the subsidy. The end consumers had not felt the pinch till November 2020 thanks to muted global LPG prices. Even without subsidies, domestic LPG cylinders cost just around Rs 600, close to the price at which the subsidy kicked in. While the global prices have since risen, the government has not reinstated the subsidy. India imports more than 55% of its LPG requirement and the cost of an unsubsidised cylinder depends on global rates.