Why is India facing a shortage in LPG?
High import dependency is a key reason for this. India imports roughly 60-62 per cent of its total LPG requirements. This is also because domestic production cannot meet the surge in demand — partly due to the success of the Pradhan Mantri Ujjwala Yojana. The ongoing US-Israel-Iran war has disrupted supply by making it difficult for ships carrying LPG to pass through the Strait of Hormuz, this has widened the demand-supply gap.
India also does not have adequate strategic reserves for the product. Unlike crude oil, India lacks large-scale strategic LPG reserves. Current storage capacity is estimated to last only about 22 days, which is insufficient for prolonged geopolitical disruptions.
What are some steps which the Centre can take to increase supply in domestic market?
To increase LPG supply during the current crisis, the Government has already implemented several emergency measures and is exploring long-term structural changes too.
A three-member committee of Executive Directors from three public sector oil refiners – IndianOil, Hindustan Petroleum and Bharat Petroleum — has been constituted to review allocations to restaurants, hotels and other commercial users and to ensure fair and transparent distribution of available LPG supplies.
What are the Short-term emergency measures?
Short-Term Emergency Measures include invoking the Essential Commodities Act (ECA) to mandate that all oil refineries — including private and SEZ-based units — maximise LPG production.
Refineries have been directed to stop using propane and butane for petrochemical manufacturing and instead divert these streams for the production of domestic LPG. This has increased domestic production by roughly 28 per cent.
Under the Natural Gas (Supply Regulation) Order, 2026, the government has established a four-tier priority system where household Piped Natural Gas (PNG) and LPG production receive 100 per cent assured supply, while sectors like fertilisers and power face cuts.
The mandatory gap between domestic cylinder bookings has been increased from 21 to 25 days to prevent artificial scarcity and panic booking. The government is expanding the Delivery Authentication Code (DAC) system to 90 per cent of consumers to ensure cylinders aren’t illegally diverted to the commercial market by distributors.
What are the long-term measures?
For the long-term it needs to work on diversification strategies like alternative sourcing.
To reduce reliance on the Strait of Hormuz, India has signed a long-term deal to import 2.2 million tonnes of LPG from the US Gulf Coast in 2026, which covers about 10 per cent of total imports.
It should be noted that India was previously importing approximately 60 per cent of its LPG requirements from Gulf countries such as Qatar, the UAE, Saudi Arabia, and Kuwait, while 40 per cent is produced domestically. Procurement has now been actively diversified, with cargoes being secured from the US, Norway, Canada, Algeria, and Russia, in addition to available Gulf sources.
Experts have recommended building dedicated underground LPG storage caverns similar to the Strategic Petroleum Reserves (SPR) for crude oil, which could provide a 45–60 day supply buffer during wars.
The Centre is encouraging a shift to e-cooking (induction stoves) and biogas to permanently lower the per-capita demand for LPG.
Do Indian companies have the capacities to produce more LPG? If yes, why were they not producing it?
Indian companies do have the capacity to increase LPG production, but it is technically and economically limited. While they have recently ramped up output by 28 per cent under emergency government orders, this only covers a small fraction of the total demand.
Indian refineries are currently operating at 100 per cent capacity or more. To squeeze out more LPG, they are diverting feedstock, using natural gas to extract additional LPG.
These measures have increased domestic production from roughly 37,000 tonnes per day to over 46,000 tonnes per day.
Refineries work by refinery design or yield limits and global market economics. Most Indian refineries are optimised to produce high-value fuels such as petrol and diesel. LPG is often a by-product of the refining process, and typical yields are only about 4–5 per cent of the total crude processed. You cannot significantly increase LPG without also producing more petrol and diesel, for which there may not be equivalent demand.
There is also the issue of economic margins. Propane and butane often fetch higher prices when used in the petrochemical industry than when sold as cooking gas. Besides, LPG was abundantly and cheaply available in international markets (especially from the US and Middle East), Indian companies saw no major economic incentive to invest in the expensive infrastructure needed to drastically shift refinery yields toward LPG.
What is the current domestic LPG price?
The Minister for Petroleum and Natural Gas, Hardeep Singh Puri, informed the Lok Sabha on March 12 about the steps taken in response to disruption to the global energy supply arising from the ongoing conflict in West Asia. As regards LPG pricing he said: “Consumer prices have been shielded from global market conditions. Despite the Saudi Contract Price rising 41 per cent between July 2023 and March 2026, the PMUY beneficiary price has fallen 32 per cent in the same period and stands at Rs 613 per 14.2 kg cylinder in Delhi.”
“The non-subsidised consumer price stands at Rs 913 following the recent Rs 60 adjustment, against a market-determined price of approximately Rs 987. Of the Rs 134 per cylinder adjustment required by prevailing global market conditions, the government absorbed Rs 74,” he said.
The effective additional cost for a PMUY household is under 80 paise per day, he said, adding that equivalent LPG prices in the neighbourhood stand at Rs 1,046 in Pakistan, Rs 1,242 in Sri Lanka, and Rs 1,208 in Nepal. OMC compensation of Rs 30,000 crore has been approved against losses of approximately Rs 40,000 crore in 2024-25.
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