Why India Is Facing an LPG Shortage

Over the past few weeks, several cities across India have reported delays in LPG cylinder deliveries, particularly for commercial users such as restaurants and small food businesses. Many eateries have publicly shared concerns about reduced cylinder availability and rising operating uncertainty. While most households are still receiving cooking gas, commercial buyers in some areas are experiencing clear supply pressure.

To understand why this is happening, it helps to look beyond the headlines and examine how India’s LPG market actually works. Data from the Petroleum Planning and Analysis Cell (PPAC), which functions under the Ministry of Petroleum and Natural Gas, shows that India’s LPG supply chain relies heavily on imports. When global energy flows are disrupted, the impact quickly reaches domestic markets.

Understanding this structure helps explain why the current LPG supply stress has emerged and why certain sectors are feeling the pressure more than others.

India’s LPG Demand Has Grown Faster Than Domestic Supply

India has witnessed a major transformation in cooking fuel usage over the past decade. Government initiatives such as the Pradhan Mantri Ujjwala Yojana (PMUY) significantly expanded LPG access to millions of households that previously relied on traditional fuels such as firewood or kerosene. As a result, the number of LPG consumers increased rapidly.

However, domestic production of LPG has not expanded at the same pace as demand. According to recent PPAC data for the first half of FY 2025–26, India produced around 6,219 thousand metric tonnes (TMT) of LPG while total consumption reached approximately 16,200 TMT.

This gap between production and consumption means that imports play a crucial role in maintaining supply. During the same period, India imported roughly 10,731 TMT of LPG, resulting in an import dependency of about 62%. In simple terms, nearly two-thirds of the LPG used in India comes from international markets.

This heavy reliance on imports makes the country vulnerable to disruptions in global energy supply chains.

Household Cooking Drives the Majority of LPG Consumption

Another defining characteristic of India’s LPG market is that household consumption dominates overall demand. According to PPAC distribution data, the vast majority of LPG cylinders sold by oil marketing companies are used for domestic cooking.

Estimates suggest that close to 90% of LPG cylinders in India are consumed by households. This pattern plays an important role in shaping government policy during supply disruptions.

Global Geopolitical Tensions Are Disrupting LPG Supply

The current supply stress has largely been linked to geopolitical developments affecting global energy trade routes. Rising tensions in West Asia, including the ongoing conflict involving the United States, Iran and Iraq, have created uncertainty around shipping routes and energy infrastructure in the region.

One of the most critical chokepoints in global energy transportation is the Strait of Hormuz. This narrow waterway connects the Persian Gulf to international shipping routes and carries a large share of the world’s oil and gas exports. A significant portion of LPG shipments destined for Asia also passes through this corridor.

When geopolitical tensions rise in this region, shipping activity can slow down due to security risks, insurance costs and logistical disruptions. Even temporary delays in shipments can affect countries that rely heavily on imported fuel.

For India, which depends on imports for a large share of its LPG consumption, any slowdown in shipments from Gulf producers quickly translates into tighter domestic supply conditions.

Economic Implications of the LPG Supply Crunch

If the current supply disruptions continue for an extended period, the effects could spread beyond restaurants and food vendors. LPG plays a critical role in several sectors of the economy, including hospitality, catering, and small food manufacturing.

When commercial LPG becomes scarce, businesses may face higher costs or temporary operational disruptions. These pressures can eventually translate into higher prices for consumers, particularly in the food and hospitality industries.

Energy supply disruptions also tend to influence financial markets. Investors often track developments in energy supply chains because companies involved in refining, importing and distributing LPG may experience cost fluctuations during such periods.

Oil marketing companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum remain closely watched during supply disruptions, as their operations depend heavily on global energy logistics.

The Broader Lesson for India’s Energy Security

The current LPG supply stress highlights a structural challenge in India’s energy system. As demand for cleaner cooking fuel continues to grow, the country’s dependence on imported LPG remains high.

Strengthening domestic refining capacity and diversifying energy sources could help reduce long-term vulnerability to global disruptions. Expanding alternative cooking technologies, such as electric induction systems, and exploring new energy supply partnerships may also contribute to improving energy resilience.

While the present disruption may eventually stabilise as global shipping normalises, it serves as a reminder that energy security remains closely tied to international geopolitical developments.

Conclusion

India’s LPG supply system relies heavily on imports, with roughly 62% of total demand met through international shipments, according to recent PPAC data. As geopolitical tensions affect global energy routes, supply disruptions can quickly impact domestic markets.

During the current crisis, commercial users such as restaurants and hotels are experiencing the greatest pressure because government policy prioritises household cooking gas distribution. For policymakers, the situation underscores the importance of strengthening domestic energy production and reducing dependence on global supply chains.

For investors and businesses, it highlights how global events can influence even everyday essentials such as cooking fuel. In an increasingly interconnected world, understanding these economic and energy dynamics becomes crucial for both households and financial decision-makers. For individuals seeking structured insights into economic developments and long-term financial planning, Moneyevsta Financial Advisory helps clients navigate changing market conditions with informed and data-driven strategies.