Why in news?

The blockade of the Strait of Hormuz exposed India’s dependence on imported cooking gas, prompting the government to invoke the Essential Commodities Act, 1955.

The Act serves as an emergency measure, allowing the Centre to increase domestic LPG production, prioritise household supply, and regulate natural gas allocation while longer-term energy diversification strategies are pursued.

What’s in Today’s Article?

• Key Provisions of the Essential Commodities Act
• Why the Essential Commodities Act Was Invoked?
• Government Measures to Increase Domestic LPG Production
• Regulation of Natural Gas Supply Under the Government Order

Key Provisions of the Essential Commodities Act

• The Essential Commodities Act, 1955 empowers the Union government to regulate the production, supply, and distribution of essential goods such as foodstuffs, edible oils, fertilizers, drugs, fuels, and seeds.
• Under Section 3 of the Act, the government can take measures to ensure adequate supply and fair prices of essential commodities.
• These include setting price controls and stock limits, regulating storage, transport, and distribution, prioritising production, and preventing hoarding and black marketing.
• The Act has been used in the past to address shortages of commodities such as wheat, sugar, and pulses, and was also invoked during the COVID-19 lockdown to curb hoarding, black marketing, and profiteering of essential goods.

Why the Essential Commodities Act Was Invoked?

• Impact of West Asia Conflict on Energy Supplies - The ongoing conflict in West Asia, including attacks near the Strait of Hormuz, has disrupted maritime trade routes. This chokepoint handles a significant share of global energy shipments, affecting India’s energy imports.
• Panic Over LPG Supply - While a large portion of global oil passes through the Strait of Hormuz, the immediate concern for India has been the disruption of Liquefied Petroleum Gas (LPG) supplies, leading to fears of shortages among consumers.
• Rising Domestic Demand for LPG - Government schemes such as the Pradhan Mantri Ujjwala Yojana expanded LPG coverage from about 62% of households in 2016 to nearly universal coverage today, significantly increasing national demand.
• Dependence on LPG Imports - India’s domestic LPG production has not matched consumption. In 2024–25, refineries produced 12.8 million tonnes, covering only 41% of the total demand of 31.3 million tonnes, with around 90% of imports passing through the Strait of Hormuz.
• LNG Supply Dependence - India also relies on Liquefied Natural Gas (LNG) for cooking, transportation, and commercial use. While 52% of LNG demand is met domestically, about 25% of consumption is imported from the Persian Gulf, highlighting India’s dependence on the region.

Government Measures to Increase Domestic LPG Production

• Directive to Refineries - The government ordered oil refineries to divert propane and butane streams to LPG production, instead of using them for petrochemical manufacturing, to boost domestic cooking gas supply.
• Expansion of the Order - A revised directive extended the order to SEZ refineries and petrochemical complexes, requiring additional hydrocarbon streams such as propylene and butene (C3 and C4 streams) to be used solely for LPG production.
• Refineries Covered Under the Order - The directive applies to state-owned refiners such as IOCL, BPCL, HPCL, ONGC, Chennai Petroleum, and Numaligarh Refinery, as well as private companies like Reliance and Nayara Energy.
• Increase in Domestic LPG Output - According to the government, the measure has raised domestic LPG production by about 25%, although a significant portion of demand still needs to be met through imports.
• Prioritisation of Household LPG Supply - All LPG produced under the order must be supplied to IOCL, BPCL, and HPCL, which have been instructed to prioritise domestic household consumption. As a result, reduced supply to commercial users has affected restaurants, hotels, and hostels, forcing some to limit operations.

Regulation of Natural Gas Supply Under the Government Order

• The government’s order introduces a priority-based allocation system for natural gas, overriding existing supply contracts to ensure essential sectors receive adequate gas during supply disruptions.
• Top Priority Sectors - Highest priority is given to piped natural gas for households, compressed natural gas for transport, LPG production, and pipeline compressor fuel.
  • These sectors will receive 100% of their average consumption over the past six months, subject to availability.
• Supply Allocation for Fertiliser Sector - Fertiliser manufacturers will receive around 70% of their normal gas requirement, though allocations may be adjusted if disruptions continue and agricultural demand increases during the kharif sowing season.
• Reduced Supply for Other Industries - Gas supplies to tea, manufacturing, and other industrial sectors have been limited to 80% of their usual demand, while oil refineries will receive only about 65% of their regular gas allocation.
• Curtailment for Petrochemical Facilities - Some petrochemical plants operated by ONGC, GAIL, and Reliance may face partial or complete LNG supply cuts under the revised allocation framework.