According to government officials, the damage caused by ongoing tensions in the Middle East is so extensive that it could take 3 to 4 years for LPG supply to return to normal. The exact extent of the damage isn't yet clear, which is causing delays in repair and restoration work, while this situation could affect the availability and prices of cooking gas for a long time. Along with India, other countries worldwide are also facing gas shortages due to Middle East tensions. However, for India, this problem could persist for the next 3 to 4 years.
A senior government official stated in a media report that it could take three to four years to fix the disruption in the global LPG supply chain, while it's currently unclear whether production has stopped temporarily or if permanent damage has occurred. India relies heavily on West Asia for its LPG supply. In response to military actions by the US and Israel, Iran attacked energy infrastructure in the region and blocked the Strait of Hormuz, severely impacting India's LPG supply. An official, speaking on condition of anonymity to Moneycontrol, said that based on information from suppliers, it could take at least three years, and possibly longer, to resume supply. The official pointed towards India's increasing import risks and cost pressures.
Import Dependency and Supply Chain Challenges
India's dependence on LPG imports remains very high, with approximately 60 percent of total consumption met through imports. Before the conflict began, about 90 percent of this supply came through the Strait of Hormuz. By March 24, the share of imports from Gulf countries had dropped to 55 percent. This indicates both a disruption in supply and that India has begun exploring new supply routes. According to a report released in April by Rubix Data Sciences and Vayana Trade Exchange, even after changing supply routes and finding new sources, the impact of supply disruption could remain between 40 to 50 percent. Rubix Data Sciences is a risk management and analytics firm, while Vayana Trade Exchange is a supply-chain finance and trade data platform.
Storage Constraints and Price Hikes
India's annual LPG demand is approximately 33 million tons. According to reports, as of mid-March, India had storage capacity equivalent to only 15 days of consumption. In such a scenario, changes in supply sources increase the risk of short-term supply disruptions and make the impact of price fluctuations more severe. Since mid-March, the prices of domestic cylinders have increased by 60 rupees, while commercial cylinder prices have risen by 115 rupees during the same period. The official explained that some essential LPG sources have shut down. The exact nature of this 'shutdown'—whether oil wells have dried up or production has completely halted—isn't yet clear, but suppliers suggest it will take at least three years to rectify.
Reliance on Gulf Nations and Government Measures
The UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman collectively supplied 92 percent of India's LPG, valued at 6 billion dollars in FY25. The UAE, which bore the brunt of Iranian attacks, accounted for 41 percent of imports, while Qatar accounted for 22 percent. This disruption has led to increased freight costs and insurance premiums, which are expected to drive LPG prices higher. The government is focusing on managing consumption patterns and ensuring no disruption in LPG supply to households. Alternative arrangements made during the COVID pandemic, such as diversifying import sources, rerouting ships, and increasing domestic production, are being utilized to mitigate the impact.
Key Highlights and Impact
High LPG prices are affecting commercial users such as hotels, restaurants, and small, medium, and large industries. This is also increasing subsidy pressure on oil marketing companies that supply domestic cylinders. Despite being a net exporter of refined petroleum products, India remains dependent on imports for fuels like LPG, naphtha, and fuel oil, making it vulnerable to global price fluctuations and supply disruptions.