Where does Indian LPG come from:
India imports most of its LPG and natural gas from the Middle East, particularly Saudi Arabia, Qatar and the United Arab Emirates. It is estimated that around 60-70% of India’s LPG imports transit through the Strait of Hormuz, making long-term bottlenecks along this narrow passage extremely consequential. Despite much diversification – including round-trip shipping from the US – the Gulf remains India’s dominant supplier due to short transit times, low costs and the establishment of long-term business models.
Government’s emergency measures to boost domestic supply:
In response to emerging supply concerns, the Indian government invoked emergency powers under the Essential Commodities Act, directing Indian refiners to maximize LPG production and ensure that all gas is supplied only to domestic LPG consumers and not used for petrochemical production. The government has also directed that all LPG produced under this directive should be supplied only to state-owned oil marketing companies – IOCL, BPCL and HPCL to ensure uninterrupted domestic distribution. At the same time, India has increased resources beyond the Gulf, with additional LPG cargoes coming from the United States, although these shipments are not large enough to offset the full loss to West Asian volumes.
How LPG is produced:
LPG is produced in two major ways: natural gas processing and crude oil refining. In the first method, heavy hydrocarbons such as propane and butane are separated from crude natural gas and liquefied under pressure. In crude oil refining, the propane and butane components are removed as part of the distillation process and compressed into LPG. Because a significant portion of global LPG production is tied to refining, LPG prices often move at odds with crude oil market trends.
Potential impact on prices if violence continues:
If the turmoil in the Strait of Hormuz continues, LPG prices may face upward pressure due to higher shipping costs, higher insurance prices and tight international availability. Although the government often supports households through subsidies or price interventions, continued restrictions can eventually raise market prices or increase financial burdens. Interestingly, crude oil prices have risen sharply due to geopolitical risks, while natural gas prices have remained relatively stable thanks to healthy inventories and diversified global supply chains – indicating that LPG’s current challenge is logistical rather than fundamental supply shortages.
Steps India should take to strengthen future resilience:
Looking ahead, India needs to strengthen its long-term resilience through infrastructure development, market diversification and consumption management. These include increasing LPG storage capacity, developing strategic reserves, accelerating the construction of new pipelines and import terminals, expanding the diversity of suppliers beyond the Gulf, encouraging the adoption of piped natural gas (PNG) in urban areas, and regulating the use of commercial LPG in times of crisis. Finally, reducing import dependency, expanding supplier networks and building adequate storage will play a decisive role in protecting households from long-term disruptions.
(The author is director of commodity research at Geojet Investments)
