The escalating war in West Asia and the resulting threat to energy shipments from the Gulf have prompted the government to direct all public and private refineries in the country to step up production of cooking gas by diverting feedstock away from non-essential products such as petrochemicals.
Under the Essential Commodities Act, 1955, the petroleum ministry has instructed refiners to prioritise liquefied petroleum gas (LPG) production and ensure that propane and butane streams available at their facilities are utilised primarily for cooking gas output.
The move gains significance as India currently holds only around 25 days of LPG inventory, while annual consumption stands at 33.15 million tonnes, with imports accounting for nearly 75-80% of the country’s requirement. LPG is produced from propane and butane streams generated during crude oil refining.
Essential Commodities Act
“All oil refining companies operating in India shall maximize and ensure that Propane and Butane streams produced, recovered, fractionated or otherwise available with them are utilized for production of Liquefied Petroleum Gas (LPG) and make it available to the three public sector OMCs — IOCL, HPCL and BPCL only,” the government said in an order dated March 5.
The LPG produced will be supplied to Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd, which will distribute the fuel exclusively for domestic cooking gas consumers.
The directive also prohibits refiners from diverting propane or butane streams for petrochemical products or other downstream derivatives. Any violation could attract action under the Essential Commodities Act and the Petroleum Products (Maintenance of Production, Storage and Supply) Order, 1999, the order said.
India is among the world’s largest LPG importers and depends heavily on supplies from West Asian producers such as Saudi Arabia, Qatar and the UAE, most of which transit through the Strait of Hormuz, a key energy chokepoint now under strain due to the conflict.
India imported LPG worth $12.47 billion in FY25, while imports worth $11.25 billion have already been recorded in FY26 as of January. Domestic production stood at 12.8 million tonnes last fiscal, underscoring the country’s reliance on overseas supplies.
An official said the government is closely monitoring the supply situation. “Further steps would be taken if required but as of now the situation in terms of LPG supplies to households is comfortable. We are looking for sourcing LPG from anywhere across the world,” a senior official said on the condition of anonymity.
India’s LPG consumption pattern also makes West Asian supplies particularly important. LPG used in the country typically comprises 60% butane and 40% propane, while exports from the Gulf are largely butane-dominant because LPG there is produced as a by-product of crude oil processing.
India has also started importing LPG from the United States since January, which is expected to account for about 10% of the country’s total LPG imports. US LPG supplies are largely propane-dominant as they originate mainly from natural gas processing.
Supply Diversification
Cooking gas remains a politically sensitive commodity in India due to the Pradhan Mantri Ujjwala Yojana (PMUY), under which deposit-free LPG connections are provided to women from economically weaker households and cylinders are supplied at subsidised rates.
“India currently has around 25–30 days of LPG inventory, leaving the country exposed to supply risks given its 80–85% dependence on imports and limited strategic reserves,” said Arun Kailasan, research analyst at Geojit Investments Limited.
“With household LPG penetration reaching nearly 99.8%, even minor supply disruptions could affect consumers, potentially leading to higher subsidy outlays or price adjustments to maintain affordability,” Kailasan said.
Prashant Vasisht, senior vice-president and co-group head, corporate ratings at ICRA Ltd, said India’s reliance on imported LPG remains a structural vulnerability.
“India imports about 60% of its LPG requirements, making it vulnerable to supply disruptions. LPG can be sourced from alternate suppliers in the US and other regions, though freight costs would be higher than sourcing from West Asia,” Vasisht said.
He added that higher international LPG prices linked to crude oil could also increase the government’s subsidy burden.
“Increase in international prices of LPG in line with crude oil prices and/or supply disruptions would lead to higher subsidy burden on LPG (domestic) sales, including for Ujjwala beneficiaries and other households,” he said.
Officials said India remains comfortably placed in terms of crude oil, refined products and LPG supplies, but refiners have been asked to adjust production priorities to ensure uninterrupted cooking gas availability for households amid the ongoing geopolitical turbulence in global energy markets.