Private sector firms marketing liquefied petroleum gas have been hit hard by the Iraq war and the resultant spurt in international oil prices.

Some of the smaller parallel marketers, which were tottering because of the high level of subsidy given to public sector oil companies for domestic LPG, had closed shop.

A few major ones, like Exxon-Mobil, have also closed their LPG business. Shri Shakti, another big entrant, is in dire financial straits.

The parallel marketers of LPG, who invested more than Rs 1,100 crore (Rs 11 billion) in building up infrastructure for the import, bottling and marketing of LPG, now feel "cheated".

The government had assured them that subsidy would be phased out as per the roadmap prepared for the dismantling of the administered pricing mechanism in 1997, and a level playing field created for them vis-à-vis public sector oil firms.

Contrary to their expectations, LPG subsidy, which was to come down to 15 per cent in 2000-01, had increased from Rs 70 a cylinder in 1998-99 to Rs 190 a cylinder now.

The marketers say that while international prices of LPG have shot up from $194 a tonne at the beginning of the current financial year to $311 a tonne, the government has not allowed oil PSUs to raise the retail prices of domestic LPG in line with international prices.

In the Budget for 2003-04, the government has pegged the LPG subsidy at Rs 67 a cylinder.

However, at current international prices, the total subsidy comes to Rs 190 a cylinder. Oil PSUs are being made to bear the burden of the additional subsidy of Rs 123 a cylinder.

As the parallel marketers have to source their LPG at international prices, they cannot match the subsidised price of LPG being sold by PSUs.