The petroleum ministry has turned down the demand of Gail (India) Ltd that it be allowed to market the liquefied petroleum gas produced by it.

However, it has moved a Cabinet note for allowing all domestic LPG producers, including Gail, Oil and Natural Gas Corporation and Oil India Limited, to sell the surplus, left after meeting the demand for cooking gas, to parallel marketers in the private sector.

Rejecting Gail's demand for LPG marketing rights, the petroleum ministry said the company could not be allowed to set up parallel marketing networks, including retail outlets and bottling plants, at huge costs when the four oil marketing companies -- Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum and IBP Company Ltd -- already had them.

Moreover, at the current rate of subsidy on LPG, it will not be economical for these LPG producers to sell the product to domestic consumers, according to the ministry. While oil marketing companies can cross-subsidise domestic LPG from over-recoveries on the sale of petrol and diesel, Gail, ONGC and OIL cannot do so as they are not into retailing these automobile fuels as yet.

Gail had sought permission to market LPG in the non-domestic sector from April 1, 2004. It wanted to market 90,000 tonnes of LPG -- 8.2 per cent of its annual production of 1.1 million tonnes.

The company had also sought approvals to market domestic LPG and the LPG produced from its fractionators as automobile LPG. For automobile LPG, it had proposed to initially set up 40-50 dispensing stations in major cities, which had been identified as polluted by the Central Pollution Control Board.