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Presentation on REBATE ON NON HOME DELIVERY OF LPG CYLINDERS

Presentation on REBATE ON NON HOME DELIVERY OF LPG CYLINDERS. To Mr. Apurva Chandra, Joint Secretary (Mkt) & Mr. Sanjay Gupta, Director (IOC & MC) MOP&NG by All India LPG Distributors Federation Mumbai – 13 th May 2009. OVERVIEW.

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Presentation on REBATE ON NON HOME DELIVERY OF LPG CYLINDERS

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  1. Presentation onREBATE ON NON HOME DELIVERY OF LPG CYLINDERS To Mr. Apurva Chandra, Joint Secretary (Mkt) & Mr. Sanjay Gupta, Director (IOC & MC) MOP&NG by All India LPG Distributors Federation Mumbai – 13th May 2009

  2. OVERVIEW • Home delivery of Gas cylinders is unique and unparalled system in our country. • LPG absorption has phenomenally grown from 200,000 MT in 1970 to 12 MMT now (2008) and 70% LPG refills are delivered in Metros and 14 Major cities. • With over 100 million households catered to by 9365 distributors’ delivery staff- 760 million cylinders are home delivered annually - A MAMMOTH TASK INDEED ! • While the ‘delivery man’- is unskilled and carries out, “ Pre delivery safety checks,” yet incidence of theft, misbehaviour or misdemeanor does not exist. This more than establishes the high standard of home delivery sustained by the network.

  3. INSPECTION / MARKET SURVEY • Periodical inspection is undertaken by the Oil Companies at the Distributors premises covering; distributor’s infrastructure, the profile of home deliveries of refills and documentation like Svs/ Tvs etc. • Repeated aforesaid periodical (quarterly) inspections clearly reveal that implementation of home delivery in Metros & Major cities is fully effected. However, the actual achievement emerges in the region of 90% to 95% due to inherent limitations / bottlenecks eg.... . • Market survey of October 2008 by 3rd party commissioned by the Oil Industry (with little or no participation of the network) also revealed that 95% cylinders are home delivered in Metros - A Commendable Performance Indeed !

  4. MOP & NG by its letter No. P. 20028/1/2001-PP(Pt. III) dated 28th February 2007 stipulated that “Rebate on non home delivery is being taken away on a trial basis in the market of Mumbai , Delhi, Chennai , Calcutta, Bangalore, Hyderabad, Chandigarh, Cochin, Pune, Bhopal, Ahmedabad and Lucknow till 28.02.2008, i.e., for a period of 12 months from 1.3.2007. The results may be studied thereafter based on which a decision could be taken for expanding or withdrawing this by 31.3.2008.” Contd…. INSPECTION / MARKET SURVEY

  5. Oil Industry did not undertake any study between 28.02.2007 to 31.03.2008 to assess the results of the aforesaid trial for a period of 12 months from 01.03.2007 to 28.02.2008 & Suo Moto withdrew the said facility of ‘No rebate on non home delivery’ throughout the country from 01.04.2008 The aforesaid study was to be undertaken jointly with the network as per the deliberations at the Tripartite Meeting. Subsequently, a study (October 2008) was undertaken unilaterally without the participation of the network through a third party by the Oil Industry and a report thereof submitted recently to MOPNG INSPECTION / MARKET SURVEY

  6. Overall, 77% of the customers as per the sample survey have always been getting home delivery. This undoubtedly is in itself a noteworthy performance having regard to host of bottlenecks, supply constraints and other system aberrations, notwithstanding that this 77% is only an arithmetical average of a small sample and not a representative weighted average of a sizeable sample. Other observations of the survey do not appear to be relevant in the context of the subject mater. Incidentally, the survey has not dealt with / brought out the most vital aspect of the value chain i.e. LPG Cylinder supply / stock available with the distributors. INSPECTION / MARKET SURVEY

  7. In fact, product backlog though mentioned summarily in the report, it has not been analyzed to bring out supply bottlenecks. Distributors relentlessly pursue elimination of backlog to ensure deliveries to customers and to sustain their image at the market place. The said study by Third Party & recommendations thereof by Oil Industry can not be deemed to be fair and just and consequently not binding on the network. The report & recommendations need to be studied & evaluated jointly by MOPNG, Oil Industry & the Network. Obviously, in all fairness and in keeping with the ground realities, pending final review by MOPNG, order for ‘no rebate on non home delivery’ should continue in operation as hitherto. INSPECTION / MARKET SURVEY

  8. HOME DELIVERIES / ‘SELF DELIVERIES’ IN VOGUE • Distributor network is committed to 100% SAFE home delivery of cylinders in keeping with regular and adequate supply from the Oil Industry. • It needs to be recognized that the distributor is fully geared up for 100% home delivery in terms of human resources and infrastructure. • However, supplies are many a time not in consonance with the demand, are erratic, leading to; backlog, customer grievances and acute strain on the distributor network. In such like situations, customers may be constrained to opt for self delivery. Such customers opt for self - delivery for their own convenience & of their own volition. • Customers have been found to opt for self delivery intermittently during supply constraints coupled with the fact that they hold single cylinder connection.

  9. HOME DELIVERIES / ‘SELF DELIVERIES’ IN VOGUE • Obviously, the question of any rebate on such haphazard, unplanned and unsafe non home deliveries does not arise. • In-fact rebate for self delivery is an incentive for unsafe & unhealthy practices which has to be discouraged in toto as otherwise it would set a wrong and dangerous precedent. Such hazardous & unhealthy practice will stand purified with 100% home delivery made a statutory requirement. N.B.: 100% HOME DELIVERY SHOULD BE MANADATORY. Accordingly, this needs to be made a statutory requirement. Such an act will not only obviate aberrations in the system but also go a long way towards enhancing safety which is vital for our distribution system and customer profile.

  10. SUMMATION Rebate on non home delivery is not justified: • Since Customer resorts to such occasional & unforseen upliftment of his own volition. Such random, undetermined, unplanned and inconsistent off take is not factored in the distributors delivery infrastructure/ business plan. • Infrastructure of the distributor is in place for home delivery. i.e. non home delivery does not take place due to distributor's constraints. Delayed supply from the oil Industry or delay due to any other reasons (natural calamities, strike, riots etc.) is beyond the control of the network. • Rebate tantamounts to incentive for promoting unsafe practices and such rebate for an insignificant or meagre component viz. “Self delivery “ is any way not also viable. Contd…

  11. SUMMATION Rebate on non home delivery is not justified: • Rebate on non home delivery may be considered if the quantum of such “ Self Delivery “ is substantial to offset the monthly output of delivery personnel. • In any case, as well established, the aforesaid unsafe, unhealthy and hazardous practice will stand purified in toto with 100% home delivery made a statutory provision – THE NEED OF THE HOUR. However, such statutory provision may lay down norms for non home delivery in certain environmentally fragile areas / hilly regions / far flung villages, on extra ordinary considerations. In such like situations, rebate on non home delivery may be selectively examined and be provided for by the local authority.

  12. It therefore emerges, that the survey report is not realistic and not well balanced in consonance with the factual realities at the market place and hence demotivating for the network. However, there is scope for improvement within the network which we shall continue to strive relentlessly for alround satisfaction. SUMMATION

  13. Aid memoire * Delivery Cost - Type of Expense as Commission Component Item No.1 alone in table above i.e., salaries of deliveryman could be offset in case of non home delivery of that magnitude (one deliverymen effects standard delivery of 600 cylinders per month) 13

  14. Aid memoire It therefore emerges that : • Rebate equal to the full delivery cost component in commission is neither admissible nor viable for distributors. • Rebate should be based on the actual cost of delivery. • Rebate may be considered selectively if the magnitude of such monthly self delivery exceeds 600 cylinders per month or multiple thereof.

  15. Aid memoire RELEVANT PROVISION OF MARKETING DISCIPLINE GUIDELINE (MDG 2001) MAJOR IRREGULARITIES CLAUSE NO : 14, reads “Not Giving Rebate on Non Home Delivery Excluding C&C Supplies within the Area of Distributor made on Specific request of Customer”

  16. Aid memoire RECOMMENDATION OF OIL INDUSTRY MEETING DATED 30-04-1999 : reads: "Option of switching over from home delivery to C&C should be restricted to once in six months." Despite this, the distributors are compelled by the Oil Industry to offer a penal rebate of Rs. 8/- for all self deliveries.

  17. THANK YOU FOR YOUR KIND ATTENTION

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