Why the LPG Sector Is the Worst Hit by the Iran War, A Household Fuel Crisis in the Making
With 60% Import Dependency and the Strait of Hormuz Choked, India’s Kitchen Fuel Supply Faces Its Most Severe Test
The war in West Asia has affected India’s overall energy imports, but it could be argued that no sector has been hit as hard as liquefied petroleum gas (LPG). While the country’s crude oil and liquefied natural gas (LNG) supplies have certainly been disrupted, the supply challenge in the case of LPG—used as kitchen fuel by crores of Indian households—is far more acute.
This is not a matter of abstract geopolitics. It is a matter of everyday life for hundreds of millions of Indians. When an LPG cylinder runs out, when the booking waiting period stretches, when the pressure in the flame drops—these are not inconveniences. They are disruptions to the basic rhythm of domestic life, affecting when food is cooked, how families manage their time, and ultimately, the welfare of the most vulnerable.
While India so far appears comfortable on crude oil, petrol, and diesel stocks, the government has prioritised natural gas allocation to ensure that sectors needing the fuel most receive it, while others get curtailed volumes. But in the case of LPG, relatively drastic movements have been witnessed—and the situation continues to evolve.
The Scale of the Problem
India’s annual LPG consumption is currently estimated at around 33 million tonnes, of which domestic production is around 13 million tonnes, or roughly 40 per cent. This means that India’s import dependency for LPG supplies is around 60 per cent. By comparison, the reliance on imports for crude oil is much higher at over 88 per cent. So why is it that so far India appears to be doing relatively fine on crude oil and major fuels like petrol and diesel, while LPG supplies have been severely affected?
The answer lies in the nature of the supply chain and the government’s prioritisation decisions. Crude oil can be stored in strategic reserves, refined into multiple products, and sourced from diverse suppliers. LPG, by contrast, has a more constrained supply chain, fewer alternative sources, and is subject to more immediate consumption pressures.
Moreover, the Strait of Hormuz—now effectively choked by the conflict—is a major passageway for LPG imports. Given the scale of LPG use in homes, the government has prioritised LPG supplies to households over commercial and industrial consumers. This has led to a massive shortage of the fuel for these segments across India.
Government Responses
In response to the crisis, the government has taken several measures. It has ordered refineries to maximise LPG production, and directed them to divert propane, butane, and other streams from petrochemical manufacturing to LPG production. This is a significant intervention, effectively reallocating refinery output from higher-value petrochemicals to lower-value but more essential household fuel.
The government has also increased waiting times between cylinder bookings by households—from 21 days to 25 days in urban areas and 45 days in rural areas. This is a direct signal that supply is constrained and that demand must be managed through rationing.
Such is the supply crunch, particularly for commercial consumers, that the government has activated alternative fuel streams like kerosene, fuel oil, biomass, and even coal for them. These are not perfect substitutes. Kerosene has its own safety and environmental concerns. Biomass, traditionally used in rural areas, has been progressively replaced by LPG under the Ujjwala scheme. Returning to these fuels represents a step backward in the clean energy transition.
Why LPG Is Different
To understand why LPG is the hardest hit, we need to examine the structure of India’s LPG ecosystem. Domestic refineries produce LPG as part of their output, but the share of LPG in total refinery output is relatively small—typically around 5-7 per cent. This means that even maximising production cannot fully compensate for import shortfalls.
Moreover, LPG imports are heavily concentrated in the Gulf region. Countries like Saudi Arabia, Qatar, and the UAE are major suppliers, and their exports typically pass through the Strait of Hormuz. When that passage is closed or restricted, there are no easy alternatives. Shipping from other regions would take longer and cost more, and global LPG markets are tight enough that diverting cargoes from elsewhere would require outbidding other buyers.
The government’s decision to prioritise households over commercial and industrial consumers is understandable—it protects the most essential use and the most vulnerable users. But it has consequences. Restaurants, hotels, hostels, and small businesses that rely on LPG are facing severe shortages. Some are shutting down or reducing operations. Others are turning to less clean, less efficient alternatives.
The Rural-Urban Divide
The increased waiting period for cylinder bookings—25 days in urban areas, 45 days in rural areas—reveals a stark reality about India’s energy infrastructure. Rural areas, which are harder to supply, are bearing a disproportionate share of the burden. For families that rely entirely on LPG for cooking, a 45-day waiting period means going without for extended stretches. They may fall back on biomass, with all the health and environmental consequences that entails.
This is particularly painful given the success of the Ujjwala scheme, which connected millions of rural households to LPG for the first time. Those households experienced the benefits of clean cooking fuel—reduced indoor air pollution, less time spent collecting firewood, greater convenience. Now, they are being forced back into older patterns, with all the regressive implications.
The Longer-Term Implications
The current crisis should serve as a wake-up call about India’s energy vulnerability. A 60 per cent import dependency for a fuel that is essential to household welfare is a strategic weakness. The concentration of those imports in a volatile region compounds the risk.
Several measures could reduce this vulnerability over the medium to long term. First, diversify import sources. 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.
Second, increase domestic production. This means not only maximising output from existing refineries but also exploring new sources of LPG, including from natural gas processing and coal-to-liquids technologies. It also means investing in LPG recovery from associated gas in oil fields.
Third, build strategic storage. India has strategic petroleum reserves for crude oil, but no equivalent for LPG. Building LPG storage capacity—both underground caverns and above-ground tanks—would provide a buffer against supply disruptions.
Fourth, promote alternatives. In the long run, reducing dependence on LPG through electrification of cooking (induction stoves, electric pressure cookers) could reduce vulnerability. This would require significant investment in grid reliability and appliance affordability, but it is worth exploring.
The Immediate Challenge
For now, the immediate challenge is to manage the crisis. The government’s measures—maximising production, diverting streams from petrochemicals, rationing demand—are sensible in the circumstances. But they are stopgaps, not solutions. If the conflict continues, if the Strait remains closed, the pressure will only intensify.
Households are already feeling the pinch. Commercial users are struggling. The longer the crisis lasts, the more severe the consequences will be—for businesses, for livelihoods, for daily life.
The government must continue to monitor the situation closely, to adjust measures as needed, and to communicate clearly with the public about what to expect. Transparency about the challenges and the rationale for decisions builds trust and helps people plan.
Conclusion: A Vulnerability Exposed
The Iran war has exposed a critical vulnerability in India’s energy architecture. LPG, the fuel that cleans the kitchens of crores of Indians, is heavily dependent on imports from a volatile region. When that region erupts, the consequences ripple directly into homes across the country.
The immediate crisis will pass eventually—wars end, straits reopen, markets adjust. But the underlying vulnerability will remain unless India takes steps to address it. Diversifying sources, increasing domestic production, building strategic storage, and promoting alternatives are not luxuries; they are necessities for a nation that aspires to energy security.
The lesson of this crisis is clear: dependence is dangerous, and the time to address it is now, not when the next crisis strikes.
Q&A: Unpacking the LPG Crisis
Q1: Why is the LPG sector the worst hit by the Iran war?
A: India imports about 60 per cent of its LPG requirements, and a significant portion of these imports pass through the Strait of Hormuz, which is now effectively closed due to the conflict. Unlike crude oil, which can be stored in strategic reserves and sourced from diverse suppliers, LPG has a more constrained supply chain and fewer alternatives. The government has prioritised household LPG over commercial and industrial users, creating shortages in those segments, and has increased waiting periods for cylinder bookings.
Q2: What is India’s import dependency for LPG compared to crude oil?
A: India imports about 60 per cent of its LPG requirements (around 20 million tonnes of the 33 million tonnes consumed annually). For crude oil, import dependency is much higher at over 88 per cent. However, LPG has been hit harder because of supply chain constraints, the inability to easily substitute sources, and the government’s decision to prioritise household use, which has led to rationing and shortages in other segments.
Q3: What measures has the government taken to address the LPG shortage?
A: The government has ordered refineries to maximise LPG production and divert propane, butane, and other streams from petrochemical manufacturing to LPG production. It has increased waiting times between cylinder bookings—from 21 days to 25 days in urban areas and 45 days in rural areas. For commercial consumers facing severe shortages, the government has activated alternative fuel streams like kerosene, fuel oil, biomass, and even coal.
Q4: How does the crisis affect rural versus urban households?
A: The increased waiting period for cylinder bookings is 25 days in urban areas but 45 days in rural areas, reflecting the greater difficulty of supplying remote locations. Rural households, many of which were connected to LPG through the Ujjwala scheme, may be forced back to using biomass for cooking, with all the health and environmental consequences that entails. This represents a significant setback in the clean energy transition.
Q5: What long-term measures could reduce India’s LPG vulnerability?
A: Several measures could help: diversifying import sources beyond the Gulf region (e.g., United States, Australia, African producers); increasing domestic production through maximising refinery output, exploring new sources, and investing in LPG recovery; building strategic LPG storage analogous to crude oil reserves; and promoting alternatives to LPG, such as electrification of cooking through induction stoves and electric pressure cookers, which would require investment in grid reliability and appliance affordability.
