The additional LPG produced by the refiners should be made available to the three state-run oil marketing companies (OMCs), namely Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL), said a government order dated March 5.
This additional LPG procured by the state-run OMCs could only be utilised for consumers of domestic cooking gas, the order said. Meanwhile, all oil refining companies have been instructed to not divert, utilise or process propane or butane for manufacture of petrochemical products or other such downstream derivatives. LPG is produced using propane and butane.
The government said the decision has been taken to ensure adequate availability of domestic LPG to the country’s consumers. IOCL, BPCL and HPCL collectively supply more than 99 per cent of India’s domestic LPG.
The directive would remain applicable until further orders.
“We have enormous refining capacity, which can be utilised to produce more LPG. Our priority is to supply domestic LPG. We have LPG supplies coming from the US as well,” a top government official said on Friday.
The official did not elaborate on the volumes of additional LPG to be produced by Indian refiners.
LPG availability has tightened for India, which is dependent on imports for around 60 per cent of its domestic requirements, as tensions rise in West Asia. India sources around 85-90 per cent of its total LPG imports from the West Asia, which uses Strait of Hormuz to ship cargoes to Asia.
To diversify sourcing, Indian state-run OMCs signed a one-year contract to import around 2.2 million tonnes (mt) of LPG from the US for the contract year 2026, representing close to 10 per cent of the country’s annual LPG imports.
“Domestic refineries can be pushed to maximise LPG yields, but refinery configurations and operational constraints mean production cannot be ramped up meaningfully to compensate import; at best, incremental output may cover only one to two additional VLGC (very large gas carrier) cargoes per month,” said Sumit Ritolia, lead analyst at maritime intelligence firm Kpler.
Given India’s structural dependence on Middle Eastern LPG, and limited near-term supply elasticity, the overall LPG supply situation remains worrisome in a disruption scenario, added Ritolia.
Meanwhile, the government said the order has been issued under the Essential Commodities Act, 1955 and Petroleum Products (Maintenance of Production, Storage and Supply) Order, 1999.