India’s rising population and a progressing middle class have made LPG an essential household fuel, with government schemes like PAHAL and PMUY driving rapid adoption even beyond middle class households. Active domestic LPG connections have surged from 149 million in 2015 to over 331 million by January 2026, pushing national coverage to near‑universal levels.
However, while LPG demand grew at 4.7 per cent CAGR between FY2017 and FY2025, domestic production rose only 1.6 per cent, increasing import dependence from 49 per cent to about 60 per cent. With 85–90 per cent of India’s LPG imports traditionally sourced from the Middle East under various contracts, supply concentration risks have intensified.
To reduce this vulnerability, MoPNG in November 2025 announced India’s first structured US‑sourced LPG import program of 2.2 MMTPA, which would be about 10 per cent of India’s annual imports, benchmarked to Mont Belvieu instead of the long‑used Saudi Contract Price, marking a much-needed strategic diversification in India’s LPG sourcing.
The Israel-US – Iran war: Why Indian LPG supply is in the blast radius
Since late February 2026, the Israel-US – Iran conflict has thrust the Strait of Hormuz, the energy world’s key chokepoint into crisis. Hormuz handles around 20 per cent of global oil flows and is a main artery for LPG and LNG from Qatar, the UAE and Saudi Arabia to Asia. Even without a formal closure, insurers have cancelled or repriced war-risk cover, pushing many shippers to refrain from Hormuz-linked routes. The pinch of this disruption is being felt worldwide especially in India and Europe. It is vital to highlight the knock-on risk to Indian LPG specifically as 85 per cent of India’s LPG supply typically transits Hormuz, hence, even a de-facto closure constrains India’s intake massively. The effective halt of traffic through the chokepoint observed by media and satellite trackers has already jolted crude, gasoline and LPG flows.
The effects are already being seen in India as prices of 14.2 Kg residential cylinders have been increased by ₹60 while those of 19 Kg commercial cylinders have spiked by ₹115. Additionally, commercial establishments like hotels and restaurants also report of the possibility of cutbacks in supply of commercial cylinders as supply priority will be given to residential households. The Indian government has had to invoke emergency powers, thereby directing Indian refiners to maximise production of LPG; this is likely to have a negative impact on their gross refining margins as LPG is typically not the highest value product for them.
Avoiding the next shock: What India must do to secure its LPG future
As disruptions in global shipping routes intensify, India must shift from reactive crisis management to proactive risk mitigation. This requires comprehensive structural interventions across supply, storage, demand, and logistics. In the short-term (0-3 years):
India can reduce vulnerability in its LPG market by diversifying import sources beyond the Middle East. Increasing procurement from suppliers such as the United States, Norway and Algeria can help mitigate risks associated with disruptions in the Persian Gulf, these countries export 196 KBPD, 170 KBPD and 175 KBPD of LPG respectively.
The aim should be to bring the share of Middle Eastern LPG from about 90 per cent to 50 per cent, bringing down the exposure to around 10 MMTPA LPG import from middle east. In case of emergencies, this can be mitigated by strategic reserves, rebalancing domestic supply and conservation measures.
The balance 7-8 MMTPA may be met by sourcing 40 per cent of it from the USA, 30 per cent from Algeria, and the remaining 30 per cent from countries like Russia, Norway, Netherlands, etc. At the same time, India could expand the use of floating storage through Very Large Gas Carriers and debottleneck existing LPG import terminals to increase throughput and ensure quicker cargo turnaround during periods of tight supply.
Another important short-term measure is the creation of modest strategic LPG reserves (40-45-day storage). Estimates suggest that India’s LPG stockpile can last up to 25-30 days, given India’s high import dependence, which is expected to increase further in the future, India needs a significantly larger stockpile. While India maintains strategic crude oil reserves, a similar buffer for LPG, equivalent to a few weeks of demand, would provide an immediate cushion during supply disruptions.
India has storage facilities of 140,000 MT in Vizag and Mangalore; however, these are more commercial/ operational in nature, LPG would benefit from something like Strategic Petroleum Reserve (SPR). Additionally, improving domestic logistics is equally important; expanding rail and coastal shipping for LPG movement can help ensure that imported volumes are distributed efficiently across the country even when supply chains are stressed.
India’s LPG import terminals show uneven utilisation, with west‑coast facilities running tighter while many east‑coast assets remain underused. To address this, India must focus on enhancing capacity utilization through improved logistics, larger cargo handling, and debottlenecking at under‑leveraged ports. There is also the possibility of mandatory storage capacities at LPG import terminals which can act as “quasi‑strategic LPG buffers”; these can provide short‑term supply resilience.
These buffers not only strengthen security during disruptions but also improve the effective utility of India’s LPG import infrastructure. India’s LPG terminals have a static storage capacity of more than 500,000 MT with more additions expected in the next 5 years; even if we mandate 10 per cent buffer storage, as is being considered for RLNG terminals, we can have an additional emergency buffer of 50,000 to 60,000 MT which would be spread across the coasts of India and would give a robust short-term buffer against supply shocks.
Demand-side interventions can also play a role in the short run. Encouraging LPG conservation through more efficient appliances and awareness campaigns can reduce pressure on supplies during crisis periods. In addition, temporary fuel substitution, such as shifting some urban cooking demand to piped natural gas or electricity, along with emergency allocation frameworks that prioritise household consumption, can help manage supply shocks more effectively.
In the long-term (4-15 years), India may consider the following:
Strengthening domestic LPG supply will be critical to improving energy security. This can be achieved through focusing on technologies like Advanced Gas Recovery (AGR) systems that allow for recovery of ‘lost’ LPG from the refinery’s internal fuel gas systems without hurting chemical feedstocks, other technologies to the same effect should also be explored.
At the same time, expanding LPG import infrastructure across both coasts—including deep-draft terminals capable of handling Very Large Gas Carriers (VLGCs)—would allow India to access cargoes from a wider supplier base such as the United States, Africa and Latin America. In parallel, Indian energy companies could consider acquiring upstream equity stakes in LPG-rich gas projects abroad, creating a portfolio of “equity LPG” that provides supply optionality during periods of market disruption.
Building substantial strategic LPG storage should also become a long-term priority. Developing underground caverns and large-scale refrigerated storage capable of holding at least 60–90 days of consumption would significantly enhance resilience to geopolitical disruptions and shipping bottlenecks.
India could complement this by developing regional LPG trading and storage hubs linked to major import terminals, allowing commercial stockholding and more dynamic inventory management which could allow users to benefit from long-term price arbitrage.
Over time, Indian importers may also adopt more sophisticated procurement strategies—including diversified term contracts, destination-flexible cargoes, and financial hedging—to manage price and supply volatility more effectively.
Finally, reducing structural dependence on LPG in the cooking sector will be essential for long-term resilience. Expanding piped natural gas networks in urban areas, promoting electric cooking technologies as grid reliability improves, and scaling up biogas and bio-LPG production can gradually diversify the household fuel mix.
Decentralised bioenergy systems in rural areas could reduce long-distance LPG logistics, while alternative fuels such as methanol-based cooking solutions—being piloted in regions like Assam—may provide viable options for difficult-to-serve geographies. Over time, a more diversified cooking energy basket will moderate LPG demand growth and reduce India’s exposure to international supply disruptions.
Bottom line
India’s LPG successes now collide with a hard geopolitical lesson, i.e., over-concentration around a single maritime chokepoint. The immediate task is to bridge the next 1–2 quarters through diversified cargoes, insurance backstops and stronger operating stocks. The strategic task is to lock in durable diversity (US, West Africa), build LPG buffer storage, and structurally temper urban LPG growth through PNG/electric cooking so that the next chokepoint shock bends but doesn’t break the refill cycle in Indian kitchen.
(The article is authored by Sourav Mitra -Partner and Praveen Kumar Rai- Director- Oil & Gas, Grant Thornton Bharat. The views and opinions expressed are solely those of the author. ETEnergy does not endorse or take responsibility for the content.)
