Key Details
The Committee Report on Optimization of LPG and Petroleum Product Movements examines how refineries and import terminals supply LPG bottling plants and petroleum-product depots through pipelines, railways, coastal shipping and roads. LPG remains too dependent on roads, while petroleum products already rely heavily on pipelines but face problems of underused shared capacity, fragmented infrastructure planning and tax-related distortions.
Area | Finding or proposal |
|---|---|
LPG transport cost | In FY2023, average operating cost was ₹3,422 per tonne by road, ₹2,120 by rail and ₹926 by pipeline |
LPG modal mix | Approximately 49–50% moved by road, 43–45% by pipeline and 6–7% by rail |
Pipeline connectivity | More than 60% of 213 LPG bottling plants lacked direct pipeline connectivity |
Liquid petroleum products | Over 60% moved by pipeline, around 29% by rail, 10% by coastal shipping and 1% by road |
Shared pipeline capacity | Only around 8.5% of 8.8 MMTPA of examined common-carrier capacity was used in FY2024–25 |
Tax changes | Bring petrol, diesel and aviation turbine fuel under GST and reduce GST on pipeline transport from 18% to 5% |
LPG Is Not Using the Lowest-Cost Mode Enough
The principal mismatch lies in LPG logistics. Road cost nearly four times as much per tonne as pipeline transport in the report’s FY2023 comparison, but continued to carry approximately half of primary LPG movement.
The modal mix has nevertheless improved. One series in the report shows road’s share falling from 64% in FY2017 to 49% in FY2023, while pipeline movement increased from 31% to 45%.
Pipeline operating costs do not tell the whole story. Pipelines require substantial upfront investment and stable volumes, making them best suited to long-distance, high-volume corridors. Connecting every bottling plant would not necessarily be economical.
The committee therefore envisages:
pipelines for routes with sustained demand;
rail for flexible or moderate-volume movement; and
regional hubs supplied by pipeline or rail, followed by shorter road journeys.
The Problem Is Different for Petrol, Diesel and Aviation Fuel
Liquid petroleum products already rely predominantly on pipelines. Road accounts for only about 1% of their primary movement, although it remains essential for delivery from depots to retail outlets and consumers.
Rail serves moderate-volume destinations and accommodates seasonal changes in demand. Coastal shipping helps evacuate production from coastal refineries, while pipelines carry sustained bulk volumes to inland markets.
The report is therefore not proposing a pipeline-only network. It seeks a more efficient division of roles in which costly long-distance road movement is minimised without sacrificing the flexibility needed during disruptions or demand changes.
Tax Rules Can Override Logistics Efficiency
Petrol, diesel and aviation turbine fuel remain outside GST. Central Sales Tax on interstate transactions can make it cheaper for an oil company to move fuel over a longer distance within a state than obtain it from a closer facility across the state border.
The committee recommends bringing these fuels under GST. Until then, it proposes reducing CST to nil so that companies can source products from the nearest suitable supply point.
Transport taxation creates another distortion. Pipeline transportation attracts 18% GST, compared with 5% for rail. Since input-tax credit is unavailable when transporting fuels outside GST, this difference can favour rail even where pipeline operations cost less.
Infrastructure Sharing Works, but Reserved Capacity Remains Idle
Oil companies already use product exchanges and one another’s terminals, pipelines and storage facilities. The report says these arrangements meet about 20 MMTPA — more than 20% of petroleum-product demand — across 55 locations. They also allow supplies to be rerouted during refinery shutdowns, pipeline outages and regional demand spikes.
Dedicated common-carrier capacity has produced weaker results. Only about 8.5% of the examined capacity was used in FY2024–25; capacity on one pipeline had reportedly remained unbooked for nearly a decade.
For future pipelines, the committee proposes a 5% minimum common-carrier allocation, with additional capacity created against firm five-year commitments and financial guarantees from prospective users. This would link investment more closely to credible demand.
What is a common-carrier pipeline? It is a pipeline in which capacity is available to eligible third parties on non-discriminatory terms rather than being reserved entirely for its owner.
Pipeline Proposals Still Need Economic Appraisal
The committee identifies several potential pipeline extensions, spur lines and interconnections that could replace sustained road or rail movement. It also suggests viability-gap funding for strategically important projects that cannot independently earn commercial returns.
These proposals are not yet investment-ready. The committee explicitly states that it did not conduct economic viability or cost-benefit analysis for the suggested LPG connections.
Before approval, each route would require assessment of:
expected and contractually committed throughput;
construction and operating costs;
savings compared with rail or road;
safety and emissions benefits; and
the cost of last-mile distribution.
Policy Relevance
The largest modal inefficiency is concentrated in LPG. Other petroleum products already use pipelines for most primary transport.
Low operating cost does not automatically establish project viability. Pipeline economics depend on route length, throughput and long-term demand.
Tax reform could improve logistics without new infrastructure. Removing interstate and modal distortions may shorten routes and change transport choices using existing assets.
Shared access must be supported by committed demand. Reserving capacity produces little value when users cannot access connected facilities or will not guarantee volumes.
Existing product exchanges offer a workable resilience model. They improve asset utilisation and maintain supply without requiring every company to duplicate infrastructure.
Public support requires measurable wider benefits. Viability-gap funding would need to be justified through logistics savings, supply security, safety or emissions reduction.
Follow the Full Report Here: PNGRB Committee Report on Optimization of LPG and Petroleum Product Movements