India’s LPG dependence on U.S.

Around 67% of India’s LPG is now coming from the U.S., reflecting a major sourcing shift amid disruptions in the Strait of Hormuz. India has also secured about 2.2 million tonnes of U.S. LPG for 2026 through a long-term agreement.

Proximity Pricing

• India imports nearly 60% of its LPG consumption, traditionally relying heavily on West Asian suppliers.
• Nearly 90% of Gulf LPG supplies to India pass through the Strait of Hormuz, creating a major supply vulnerability.
• Gulf shipments take only 5–10 days, compared with about 25–35 days from the U.S., giving West Asia a proximity advantage.
• U.S. LPG may be cheaper at the production point, but Gulf LPG is usually cheaper at Indian ports due to lower freight costs.
• Geopolitical disruptions and higher risk premiums have temporarily weakened the Gulf’s traditional pricing advantage.
• U.S. supplies may also be more exposed to trade and geopolitical considerations than long-term West Asian supply agreements.

LPG as a Politically Volatile Fuel

• LPG is a socially and politically sensitive essential fuel, making availability more important than cost optimization during crises.
• Saudi LPG benchmark prices rose from about $543/tonne to $790/tonne, making U.S. cargoes relatively attractive.
• U.S. imports reduce Hormuz-related supply risks but expose India to commodity-price, freight and dollar risks.
• A stronger dollar and weaker rupee increase the landed cost of imported LPG.
• Public-sector OMCs accumulated over ₹59,000 crore in LPG under-recoveries as domestic prices remained below import costs.

Domestic Scene

• PSU OMCs had around 33.14 crore active domestic LPG consumers as of July 1, 2026.
• India’s LPG consumer base recorded a 7.6% CAGR during 2015–2026.
• LPG demand for 2026–27 is estimated at around 34,692 TMT.
• In Q1 FY27, domestic production was about 4.3 MMT against consumption of 6.5 MMT, highlighting import dependence.
• LPG production increased 35.73% year-on-year to 4.26 MMT after refineries diverted more propane and butane into the LPG pool.
• During the crisis, OMCs increased daily LPG production from 34,000 MT to 55,000 MT.

Steps Needed

• India should diversify LPG sourcing towards Australia, Argentina, Nigeria and Angola while retaining Gulf and U.S. supplies.
• India must increase domestic LPG production to reduce structural import dependence.
• India should develop multiple and geographically diversified supply chains to minimise concentration risk.
• OMCs need stronger forex hedging mechanisms against dollar and rupee volatility.
• India should build larger strategic LPG reserves to withstand geopolitical and supply disruptions.
• Energy security requires diversification, not replacing dependence on one supplier with dependence on another.