Major Update on LPG Supply: India's Domestic Gas Production Drops, Imports Halve—What Is the Reason?

India LPG Crisis: India has witnessed a decline in both LPG imports and domestic production; compared to last month, domestic output has fallen by approximately 10 percent. This situation is a direct consequence of the escalating tensions between the United States and Iran.

LPG Supply in India: India’s supply of Liquefied Petroleum Gas (LPG) is under severe pressure during the month of April. Compared to February, imports have dropped to nearly half their previous volume. Furthermore, domestic production has also seen a decline of approximately 10 percent relative to the previous month. The impact of the rising tensions between the U.S. and Iran is making the situation increasingly difficult; energy shipments are facing disruptions, and overall supply is steadily dwindling.

Declining LPG Imports

Between April 1 and April 14, India imported an average of just 37,000 tons of LPG per day—a stark contrast to the daily average of 73,000 tons recorded in February. Meanwhile, although the United States has emerged as the single largest supplier, India remains dependent on Gulf nations for more than half of its total LPG imports.

Since the majority of the world’s LPG supply is booked under long-term contracts—leaving only a very small fraction available for immediate, spot-market purchases—India is finding it difficult to rapidly ramp up its supply levels. Concurrently, domestic demand continues to rise. Even amidst reports of a potential ceasefire between the U.S. and Iran, there has been no significant relief yet in alleviating this ongoing crisis.

When Will Supply Be Restored?

As previously noted, India relies heavily on Western Asia for its LPG supply. This supply chain has been severely disrupted by factors such as the potential blockade of the Strait of Hormuz and retaliatory attacks by Iran on energy infrastructure—actions taken in response to military operations by the U.S. and Israel. According to a report by Moneycontrol, an official, speaking on the condition of anonymity, stated: “Based on information received from affected suppliers, it could take at least three years—and perhaps even longer—for supplies to be restored.” The official pointed to India’s escalating import risks and cost pressures. India’s reliance on LPG imports remains extremely high; approximately 60 percent of its total consumption is met through imports alone.

Prior to the outbreak of the war in February, roughly 90 percent of these supplies arrived via the Strait of Hormuz. By March 24, the share of imports from Gulf nations had dropped to 55 percent—a figure indicative of both supply disruptions and a diversification of supply sources.