LPG crisis: Higher output may only offer partial relief, meeting only half of India’s demand

Higher LPG output may only offer partial relief, meeting only half of India’s demand

• India increases domestic LPG output amid West Asia tensions
• LPG imports still cover 55–60% of India's demand
• Government urges against panic buying, assures price control

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As India grapples with gas shortage amid the escalating West Asia tensions that has disrupted the country’s energy supplies, refiners have started optimising liquified petroleum gas (LPG) output by shifting feedstock away from petrochemical production towards LPG recovery.

However, industry sources and analysts said that such optimisation can only provide marginal incremental supply and cannot materially reduce India’s heavy reliance on LPG imports, which stands around 90 percent.

“Even if refineries manage to increase LPG output by 10–20 percent above the current domestic production, domestic supply would only rise to roughly 47–50 percent of the total demand, leaving a significant gap that must still be filled through imports,” Sumit Ritolia, lead  research analyst, refining and modelling at Kpler, said.

Indian refiners have increased their domestic output of LPG by 25 percent since the government passed the order to increase the domestic LPG output under the Essential Commodities Act, 1955, as the West Asia conflict posed risks to New Delhi’s energy supplies, according to government officials from the oil ministry.

To put things in perspective, India consumes nearly 1 million barrels per day of LPG. Of this, only 40–45 percent is produced domestically, and 55–60 percent is imported.

Of these imports, around 80–90 percent typically transit through the Strait of Hormuz, making the supply chain particularly sensitive to disruptions in the region.

“While sourcing LPG from suppliers outside the Middle East is possible, voyage times are significantly longer, limiting how quickly disrupted cargoes can be replaced,” Ritolia highlighted.

The petroleum ministry on Wednesday advised people against panic buying of LPG amid reports of shortage across the country while urging citizens to conserve fuel wherever possible. The ministry also said that the Centre has taken measures to ensure that the prices remain under control.

During a media briefing, Sujata Sharma, Joint Secretary at Ministry of Petroleum and Natural Gas, said that the government has absorbed a significant part of the cost increase due to the crisis to protect the consumers.

Government sources have earlier told Moneycontrol that India is securing LPG supplies from an international portfolios of global companies, including UAE’s Adnoc (Abu Dhabi National Oil Company), Sonatrach, Algeria’s state-run oil and gas company, and others.

India’s crude oil, refined product supply remain comfortable

India was expected to import around 2.6 million barrels of oil per day via the Strait of Hormuz in March, according to tanker data and trade sources. At the same time, the country is seeing a notable pickup in Russian barrels.

Based on vessel tracking data by Kpler, incremental Russian crude imports in March could reach ~1-1.2 million barrels per day. This means the effective shortfall from Hormuz exposure narrows to around 1.6 mbd.

“While this might initially appear concerning, it is important to remember that India is one of the world’s largest exporters of refined products,” Ritolia said.

In 2025, India’s net refined product exports averaged around 1.1 mbd. Additionally, there has been a strong push to diversify crude sourcing from alternative suppliers. “This means that refined product supply for domestic demand remains comfortable, and there are currently no indications that India will struggle to meet internal consumption requirements,” Ritolia highlighted.

Government sources also confirmed that there is a lot of demand coming in from different countries for India's refined oil products and the country do not wish to stop its petroleum products exports for now.

Analysts note while crude supply risk can partially be mitigated through Russian flows and diversification, refined product supply remains relatively comfortable, LPG availability will be the real variable to monitor in the coming weeks.