Govt orders refiners to maximise LPG output as Middle East conflict widens
The government invoked emergency powers under the Essential Commodities Act to direct refiners to maximise LPG production and prioritise domestic supply as disruptions in the Strait of Hormuz and the widening Middle East conflict threaten imports
New Delhi: The government invoked sparingly used emergency powers to direct oil refineries to ramp up LPG production as it looks to increase the availability of domestic cooking gas to hedge against potential disruptions from the widening Middle East conflict.
India consumed 31.3 million tonnes of LPG in 2024-25, of which only 12.8 million tonnes were produced domestically, with the remainder imported. Imports have become increasingly vulnerable as 85-90 per cent come from countries like Saudi Arabia that rely on the narrow but critical Strait of Hormuz for transit. The strait has been effectively blocked following a week-old escalation in the region, after US and Israeli strikes on Iran prompted Tehran to retaliate against US bases in neighbouring countries.
While India has surplus oil refining capacity, it is short of LPG production. Now all public and private sector refiners have been asked to “maximise and ensure that propane and butane streams produced… are utilised for production of liquefied petroleum gas (LPG),” according to an oil ministry order of March 5.
LPG is a mixture of propane and butane.
The order, issued under powers derived from the Essential Commodities Act, 1955 (popularly called ESMA), asked the refiners to make such LPG produced available only to three public sector oil marketing companies – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).
The refiners have also been barred from using the two chemicals for producing petrochemicals.
“All oil refining companies shall not divert, utilise, process, crack, convert or otherwise employ propane or butane stream for the manufacture of petrochemical products or other such downstream derivatives,” the order said.
The LPG so produced is to be sold only to domestic households for cooking purposes, it said, adding any contravention of the order shall attract penal action.
India has 33.08 crore active LPG consumers, and the government is looking to maintain an uninterrupted supply.
Earlier, the government invoked ESMA provisions in the oil sector during the post-Ukraine war period, asking refiners to ensure domestic fuel availability and not export, which had become lucrative due to high margins.
A top Oil Ministry official said oil and gas supplies through the Strait of Hormuz have been impacted and the country was sourcing fuel from outside the conflict zone.
LPG under the recently signed LPG import contract with the United States has also started coming in.
Under the deal, public sector oil companies will import about 2.2 million tonnes of LPG from the US Gulf Coast in 2026 – roughly 10 per cent of the country’s annual LPG imports – in a move to diversify energy sources and bolster energy security.
While the country has adequate stock of crude oil (raw material for making petrol and diesel), as much as 30 per cent of gas supplies have been hit.
To deal with the situation, allocation is being reprioritised, enforcing supply cuts for some and augmenting those for critical sectors, he said.
India consumes about 195 million standard cubic metres of natural gas daily for generating electricity, producing fertilisers, turning into CNG for automobiles, piping to household kitchens for cooking and use as feedstock in industries ranging from steel to ceramics. Roughly half of this is imported.
However, India’s main supplier, Qatar, has shut its liquefied natural gas (LNG) production facility after being hit by drones and missiles during the ongoing conflict. This, together with restrictions on the movement of ships through the Strait of Hormuz, has effectively cut off 60 mmscmd of supplies.
The official said companies are looking to buy LNG – super-cooled natural gas – from elsewhere. “A company bought a cargo (shipload of LNG) just yesterday.” “We are comfortably placed. Crude oil continues to flow. Even before the conflict broke out on February 28, 55 per cent of our sourcing was from non-Strait countries, which will now go up,” he said, adding the vulnerability on LPG has been addressed through the order issued on March 5.
Besides, Russian oil being made available after the US waiver for one month will further augment supplies.
“We are in a comfortable position. All our options are open. Whatever we lost in the Strait of Hormuz, we have been able to pick up elsewhere,” he said.
LNG is being sourced from around the globe, he said, expressing optimism that more supplies will be managed in the near future.
