The LPG Paradox, How Urbanisation, Welfare Schemes, and a Growing Middle Class Made India Hooked on Imports
As the Iran War Chokes the Strait of Hormuz, Three Decades of Growing Import Dependence Leave India’s Kitchen Fuel Supply Vulnerable
India’s reliance on imports of liquefied petroleum gas (LPG), used in crores of domestic and commercial kitchens, has grown consistently in recent decades. Now, as much as 60 per cent of India’s LPG supply comes from outside the country. And with the Strait of Hormuz effectively closed due to the Iran war, this dependence has transformed from a statistical curiosity into a daily crisis for households and businesses across the nation.
According to data published by the Petroleum Planning and Analysis Cell (PPAC), which falls under the Union Ministry of Petroleum and Natural Gas, India has been a net importer of crude oil and LPG since 1999, the earliest year for which data is available. While the country has gradually been able to produce and export its own petroleum products, LPG in particular has remained a laggard and is now the country’s most imported petroleum product.
This is not a story of sudden failure but of gradual, compounding vulnerability. Behind the growing imports lies a tale of success—urbanisation, the expansion of the middle class, and welfare schemes that brought clean cooking fuel to millions of rural households. But success in expanding access was not matched by success in expanding domestic production. The result is a structural dependence that crises like the Iran war expose with brutal clarity.
The Numbers Tell the Story
The scale of India’s LPG import dependence is staggering. Direct imports of LPG itself have grown from 1,722 thousand metric tonnes (TMT) in 1998-99 to 20,667 TMT in 2024-25—a 12-fold increase over 27 years. Given the significant domestic demand for LPG, Indian exports of cooking gas have been minimal, peaking at just 551 TMT in 2024-25.
In terms of expenditure, the government went from importing Rs 1,274 crore worth of LPG in 1998-99 to Rs 1.06 lakh crore in 2024-25—an 83-fold growth. In 1999, LPG accounted for 10 per cent of all petroleum product imports in monetary terms. Now, nearly 53 per cent of import expenditure on petroleum products is on LPG alone.
These numbers represent not just abstract trade statistics but real money—money that flows out of the country, that could have been invested in domestic production, that represents a strategic vulnerability now being exploited.
The Demand Side: Success Stories
Behind the growing imports is the rising demand for LPG—on the back of accelerated urbanisation, growth of middle-class households, and central and state government schemes for free or subsidised LPG cylinders, especially for rural households.
In 1998-99, India produced 3,599 TMT of LPG and consumed 5,352 TMT. The supply deficit—the gap between production and consumption—was 1,753 TMT. But in 2023-24, the latest year for which comparable data is available, India produced 12,779 TMT of LPG and consumed more than twice that quantity, or 29,664 TMT. This amounts to a deficit of 16,885 TMT.
While LPG consumption between 1998-99 and 2023-24 has grown more than fivefold, production grew by just over threefold in the same period. That arithmetic gap is the source of the import dependence.
Consumption has seen consistent year-on-year growth over the past two-and-a-half decades as more and more households turned to LPG as a clean fuel source for cooking. The highest growth rates came in the 2000s and 2010s, between 8 and 11 per cent each year.
In 2016-17, after the launch of the Pradhan Mantri Ujjwala Yojana (PMUY), which provides free LPG connections and heavily subsidised cylinders to poor and rural households, LPG consumption recorded a growth spike of 10.1 per cent over the previous year. That year also saw a sharp rise in LPG imports, to 11,097 TMT from 8,959 TMT in the previous year.
Earlier, rural households traditionally relied on fuel sources like firewood and animal dung for cooking. But the introduction of the PMUY resulted in increasing acceptance of LPG as a cooking fuel. According to a Lok Sabha answer, 80 per cent of PMUY beneficiaries were rural households as of end-2024.
Since 2020, growth in consumption has slowed as LPG connections reached a saturation level. In 2021-22, LPG consumption grew by 2.5 per cent over the previous year, by just 0.9 per cent in 2022-23, and by 4.1 per cent in 2023-24. As of today, there are 33.37 crore LPG customers across India, and 10.56 crore PMUY connections.
The Supply Side: Hitting a Ceiling
But even though LPG consumption growth has slowed, India has struggled to expand its production capacity to meet demand. After seeing fairly rapid production growth through the 2000s and parts of the 2010s, domestic LPG production has largely flattened since 2017-18, hovering at just under 13,000 TMT per year.
Despite expanding the capacity of its crude oil refining—a process of which LPG is a byproduct—India appears to have hit a ceiling in domestic LPG production. This is exemplified by the share of LPG in the total production of petroleum products from domestic refineries: in 1998-99, LPG accounted for 5.2 per cent of total refinery output by quantity, but by 2024-25, despite growing production capacity, LPG accounted for just 4.2 per cent of refinery output.
In contrast, the share of petrol production in domestic refineries’ output grew from 8 per cent to 17 per cent in the same period. Refineries are optimising for higher-value products like petrol, not for LPG.
This is not a conspiracy; it is economics. Refineries are businesses, and they respond to market signals. Petrol fetches higher prices than LPG. If you are a refinery operator, you configure your operations to maximise petrol output, even if that means producing less LPG. The result is that even as total refining capacity expands, LPG production stagnates.
The Strategic Vulnerability
This brings us to the present crisis. India has been reliant on imports to meet as much as 60 per cent of its LPG demand—and almost 90 per cent of those imports are sourced through the Strait of Hormuz, a crucial chokepoint for global energy flows that is now effectively closed due to the Iran war.
The numbers are stark. When the Strait closes, 60 per cent of India’s LPG supply is at risk. There is no easy substitute. Alternative suppliers are far away, global markets are tight, and shipping costs are soaring. The government can ration, prioritise, and divert, but it cannot magic LPG out of thin air.
Households are already feeling the pinch, with waiting periods extended to 25 days in urban areas and 45 days in rural areas. Commercial users are facing severe shortages, with restaurants, hotels, and small businesses struggling to operate. The government has activated alternative fuels—kerosene, fuel oil, biomass, even coal—but these are poor substitutes that come with their own problems.
The Lessons Not Learned
The current crisis was not unforeseeable. The trends were clear for years: consumption growing faster than production, import dependence rising, supply concentrated in a volatile region. Yet the policy response has been inadequate.
Expanding domestic production should have been a priority. Instead, refinery configurations have shifted toward higher-value products, leaving LPG as an afterthought. Strategic storage for LPG could have been built, as it was for crude oil. Instead, India entered the crisis with minimal buffers. Diversification of import sources could have reduced dependence on the Gulf. Instead, the concentration has, if anything, increased.
These are not failures of prediction but failures of action. The data was there. The warnings were there. But the political and economic incentives to address the vulnerability were weaker than the incentives to ignore it.
The Way Forward
The crisis will eventually pass. Wars end, straits reopen, markets adjust. But the underlying vulnerability will remain unless India takes steps to address it.
First, domestic production must be increased. This means not only maximising LPG output from existing refineries but also exploring new sources—coal-to-liquids technologies, gas-to-liquids, enhanced recovery from oil fields. It may require policy interventions to align refinery incentives with national needs.
Second, import sources must be diversified. India should actively seek LPG supply agreements with countries outside the Gulf—the United States, Australia, African producers. This would reduce the share of imports passing through the Strait of Hormuz and spread risk across multiple supply chains.
Third, strategic storage must be built. India has strategic petroleum reserves for crude oil; it needs equivalent facilities for LPG. Underground caverns, above-ground tanks, and floating storage can all provide buffers against supply disruptions.
Fourth, demand must be managed. This does not mean reducing access—the gains in clean cooking fuel access are too important to sacrifice. But it may mean promoting alternatives where feasible—electrification of cooking through induction stoves, biogas, solar thermal—to reduce the burden on LPG.
Conclusion: A Vulnerability Exposed
The Iran war has exposed a critical vulnerability in India’s energy architecture—a vulnerability built over decades of success in expanding LPG access without corresponding success in expanding LPG production. The result is a dependence on imports that leaves millions of households at risk when geopolitical storms gather.
The immediate crisis will be managed, as crises always are. But the underlying vulnerability will remain. The question is whether India will learn the lesson this time—whether it will take the steps needed to reduce dependence, diversify sources, and build buffers. If it does not, the next crisis will find the country equally vulnerable, equally unprepared.
The numbers are clear. The path forward is clear. What remains to be seen is whether the political will exists to act.
Q&A: Unpacking India’s LPG Import Dependence
Q1: How much LPG does India import, and how has this changed over time?
A: India imports about 60 per cent of its LPG requirements. Direct imports have grown from 1,722 thousand metric tonnes (TMT) in 1998-99 to 20,667 TMT in 2024-25—a 12-fold increase. In monetary terms, import expenditure grew from Rs 1,274 crore to Rs 1.06 lakh crore—an 83-fold increase. LPG now accounts for nearly 53 per cent of all petroleum product import expenditure, up from just 10 per cent in 1999.
Q2: What has driven the growth in LPG demand?
A: Demand growth has been driven by accelerated urbanisation, expansion of the middle class, and government schemes providing free or subsidised LPG connections—particularly the Pradhan Mantri Ujjwala Yojana (PMUY). Consumption grew by 8-11 per cent annually in the 2000s and 2010s. After PMUY’s launch in 2016-17, consumption spiked 10.1 per cent. Currently, there are 33.37 crore LPG customers, including 10.56 crore PMUY beneficiaries, 80 per cent of whom are in rural areas.
Q3: Why hasn’t domestic LPG production kept pace with demand?
A: Domestic production has stagnated since 2017-18 at around 13,000 TMT annually, while consumption has grown to nearly 30,000 TMT. Refineries have optimised for higher-value products like petrol—petrol’s share of refinery output grew from 8 per cent to 17 per cent between 1998-99 and 2024-25, while LPG’s share fell from 5.2 per cent to 4.2 per cent. Refineries respond to market signals, and petrol fetches higher prices than LPG.
Q4: What makes India’s LPG supply particularly vulnerable to the Iran war?
A: Nearly 90 per cent of India’s LPG imports are sourced through the Strait of Hormuz, which is now effectively closed due to the conflict. With 60 per cent of total supply coming through this single chokepoint, any disruption has immediate and severe consequences. Unlike crude oil, which can be drawn from strategic reserves, India has no equivalent strategic storage for LPG.
Q5: What measures could reduce India’s LPG vulnerability in the long term?
A: Four measures are essential: 1) Increase domestic production through policy interventions to align refinery incentives with national needs, and explore new sources like coal-to-liquids and gas-to-liquids; 2) Diversify import sources beyond the Gulf to include the US, Australia, and African producers; 3) Build strategic LPG storage analogous to crude oil reserves; 4) Promote alternatives to LPG where feasible, such as electrification of cooking through induction stoves, biogas, and solar thermal, to reduce demand pressure.
