Context

• India’s liquefied petroleum gas (LPG) challenge is not a temporary shortage but a structural imbalance rooted in the widening gap between domestic production and consumption.
• With annual demand at about 33.15 million tonnes and domestic output meeting only 40% of this requirement, the country depends heavily on imports for the remaining 60%.
• In effect, India’s LPG demand is roughly 250% of its indigenous production.
• This mismatch is particularly concerning because LPG in India is primarily a household fuel, making its supply critical to everyday life rather than flexible industrial use.

Nature of India’s LPG Dependence

• Household-Centric Consumption
  • A defining feature of India’s LPG usage is that it is overwhelmingly consumed in domestic kitchens, with commercial usage accounting for less than 10%.
  • Unlike industrial consumers, households cannot easily reduce consumption or switch fuels in response to shortages.
  • This makes LPG demand in India highly inelastic and socially sensitive.
• Rigid Demand Structure
  • Because LPG is essential for cooking, disruptions in supply directly affect millions of households.
  • This distinguishes India from countries where LPG is used more flexibly across sectors, allowing for adjustments during supply constraints.

Geopolitical Risks and Supply Vulnerability

• Dependence on a Single Corridor
  • Around 90% of India’s LPG imports pass through the Strait of Hormuz. This heavy reliance on a single route exposes the country to geopolitical risks.
  • Recent tensions have demonstrated that this corridor cannot be assumed to remain consistently secure.
• Long-Term Strategic Implications
  • Even if current disruptions ease, the perception of risk associated with this route has fundamentally changed.
  • India must now incorporate this uncertainty into its long-term energy planning.

Global Comparisons: Why India is More Exposed

• Lessons from Japan
  • Japan appears more import-dependent than India, yet it is less vulnerable.
  • LPG serves only about 40% of Japanese households, while electricity and city gas dominate residential energy use.
  • Additionally, Japan maintains over 100 days of LPG reserves, providing a strong buffer against disruptions.
• Contrasts with China and South Korea
  • In China, LPG demand is driven largely by the petrochemical sector rather than households.
  • South Korea relies more on natural gas and electricity for residential energy.
  • These diversified consumption patterns reduce their vulnerability compared to India.
• India’s Unique Exposure
  • India’s risk stems not just from how much LPG it imports, but from where it is used.
  • The heavy concentration in household kitchens makes its dependence particularly difficult to manage during disruptions.

Storage Constraints and Market Realities

• Limited Strategic Reserves
  • India’s operational LPG storage provides about 15 days of cover.
  • However, dedicated underground reserves amount to only about 140,000 tonnes, roughly 1.5 days of national demand.
  • This limited buffer leaves the country exposed to prolonged supply shocks.
• Tight Global Supply
  • The global LPG market is not highly flexible. A few Asian countries absorb more than half of the exportable supply, leaving little surplus available.
  • In the event of disruptions, India may struggle to secure alternative cargoes quickly.

Policy Measures to Reduce Vulnerability

• Prioritising Domestic Supply for Households
  • India should differentiate LPG usage by reserving domestically produced LPG and refinery outputs for household consumption.
  • Petrochemical industries should increasingly rely on imported feedstock rather than competing with domestic kitchens for supply.
• Expanding Strategic Storage
  • Building a larger LPG buffer is essential. A reserve covering two to three weeks of household demand, approximately 1.3 to 1.9 million tonnes, would significantly enhance resilience.
• Promoting Alternative Cooking Solutions
  • A sustained push toward electric cooking can gradually reduce dependence on LPG.
  • Urban and semi-urban households with reliable electricity should be encouraged to adopt induction cooking.
  • Expanding piped natural gas (PNG) networks can also help in densely populated areas, but electricity remains the most scalable alternative.

Conclusion

• India’s LPG problem is not a short-term disruption but a structural vulnerability embedded in its energy system.
• The combination of high demand, limited domestic production, concentrated import routes, and heavy reliance on household consumption creates a uniquely fragile situation.
• Addressing this challenge requires more than increasing imports; it demands systemic reform.
• By prioritising domestic supply for essential use, expanding storage, diversifying energy sources, and reducing household dependence on LPG, India can move toward a more resilient and secure energy future.