India’s LPG Disruption Highlights Energy Risks Amid West Asia Crisis, Says Report

India’s ongoing LPG disruption, triggered by tensions in West Asia, has exposed structural weaknesses in the country’s energy system, according to a report by Primus Partners titled 'LPG Vulnerability in the Shadow of the West Asia Conflict: A Wake Up Call for India’s Energy Future.' 

The report underscores the urgent need for diversification of supply sources, expansion of storage capacity, and accelerated transition toward alternative fuels to strengthen long-term energy resilience.

With more than 330 million households dependent on LPG, the disruption has extended beyond domestic consumption to affect industries, MSMEs, and the broader economy. India, the world’s second-largest LPG consumer, relies on imports for nearly 60 percent of its demand, with 85–90 percent of these supplies routed through the strategically critical Strait of Hormuz. This high dependence on a single maritime corridor has made the country particularly vulnerable to geopolitical shocks, as seen in the current crisis.

According to the report, weekly LPG imports declined by 30–40 percent amid the disruption, leading to immediate supply shortages across the country. Domestic availability fell to around 1.6 million tonnes, which is sufficient for just over three weeks of reduced demand, highlighting the limited buffer within the system. The supply crunch has triggered a sharp rise in prices, with domestic LPG cylinders increasing by ₹60 and commercial cylinders by nearly ₹200. In informal markets, prices reportedly surged to between ₹2,000 and ₹6,000 per cylinder, reflecting acute scarcity and supply-demand imbalances. The report also warns of broader macroeconomic implications, with inflationary pressures building and consumer price inflation projected to rise to 4.6 percent in FY27.

The impact has been particularly severe on commercial and industrial users, many of whom have faced supply cuts of up to 50 percent. Restaurants, small businesses, and manufacturing units have reported production slowdowns and temporary closures due to fuel shortages. In response, several users have shifted to alternative fuels such as diesel and firewood, which are not only more expensive but also significantly more polluting, raising environmental concerns alongside economic ones.

The report highlights several structural vulnerabilities that have been exposed by the crisis, including heavy reliance on Gulf imports routed through a single chokepoint, the absence of adequate strategic LPG reserves, and limited infrastructure to process alternative LPG supplies from non-Gulf sources. Existing reserves, it notes, are sufficient to cover less than two days of national demand, leaving little room to absorb supply disruptions. Additionally, renewable energy systems have not been able to provide effective backup due to insufficient storage capacity, further underscoring gaps in the broader energy ecosystem.

In response to the crisis, the government has implemented a series of emergency measures aimed at stabilising supply and managing demand. Under the LPG Control Order, refineries have been directed to maximise output, leading to an increase in domestic production of up to 40 percent. Demand-side interventions have also been introduced, including a mandatory 25-day gap between cylinder bookings and stricter delivery authentication to prevent misuse and ensure prioritisation of household consumption. Diplomatic efforts have played a role in easing immediate pressures, with the conditional reopening of shipping routes through the Strait of Hormuz allowing some resumption of supplies.

Looking ahead, the report outlines a multi-layered strategy to enhance India’s energy resilience. In the short term, it recommends diversifying import sources and routes, including sourcing from countries such as the United States and Australia and utilising alternative corridors like the Red Sea, even if this entails higher logistical costs. Over the medium term, the report calls for accelerating the transition from LPG to piped natural gas (PNG), supported by the expansion of pipeline networks and LNG infrastructure. In the long term, it emphasises the need to scale up domestic alternatives such as compressed biogas (CBG), green hydrogen, and renewable energy supported by long-duration storage solutions. India’s biomass potential, estimated at 60–70 million metric tonnes of LPG equivalent, is identified as a significant opportunity to reduce import dependence if effectively harnessed.

The report concludes that while India’s LPG expansion has been instrumental in improving access to clean cooking fuel, the current disruption serves as a critical reminder of the risks associated with import dependence. It calls for the development of strategic reserves, expansion of infrastructure along the east coast, and the creation of an integrated energy system that combines diversified fuel sources with robust storage capabilities. Strengthening resilience, it notes, will be essential to achieving a secure, flexible, and sustainable energy future aligned with the country’s long-term development goals, including the vision of Viksit Bharat by 2047.