India Diversifies LPG Imports Amid Middle East Crisis and Price Volatility

The ongoing geopolitical instability in the Middle East has forced India to overhaul its Liquefied Petroleum Gas (LPG) procurement strategy to mitigate supply chain risks. As global prices surge, the country is pivoting away from its heavy reliance on Gulf nations toward a more diversified global import basket.

Strategic Shift to Reduce Gulf Dependency

Prior to the recent conflict, India faced significant vulnerability with approximately 90% of its LPG imports sourced from the Middle East. To counter potential disruptions, India has aggressively diversified its sourcing. A standout performer in this shift is the United States, which saw its share of India’s LPG imports jump from just 8% in February to nearly one-third by April 2026. This surge was bolstered by a massive 2.2 million tonne-per-year supply agreement signed with the U.S. in late 2025, covering roughly 10% of India's annual requirements.

Other significant contributors to the revamped import basket include Iran, which accounted for about 6% of imports in April, alongside additional supplies from Argentina, Chile, France, and the Netherlands. While this diversification ensures supply continuity, it comes with the trade-off of longer shipping routes and elevated freight costs.

Impact on Consumption and Market Demand

The combination of supply tightness and price volatility has led to a visible contraction in LPG demand. Domestic consumption fell to 2.47 million tonnes in April, down from 3.2 million tonnes in February. This follows a period of record growth where consumption had reached 33.2 million tonnes in fiscal 2026.

The decline has been most pronounced in the commercial and industrial sectors. While household demand remained relatively stable, market-linked commercial users reacted swiftly to rising costs, leading to a 13% year-on-year drop in demand during March and April, followed by a 20% decline in May.

The Financial Burden on Oil Marketing Companies (OMCs)

The global LPG market witnessed extreme volatility, with the Saudi Aramco Contract Price—the benchmark for Indian imports—skyrocketing by 46% between February and June. To protect domestic consumers from inflation, state-run Oil Marketing Companies (OMCs) absorbed a significant portion of these costs.

В то время как цена на бытовой 14,2-килограммовый баллон в Дели выросла всего примерно на 10%, последствия для розничных торговцев оказались тяжелыми. Напротив, цены на 19-килограммовые коммерческие баллоны выросли более чем на 79%. Это несоответствие привело к огромным недополученным доходам; только в мае недополученная прибыль по бытовым баллонам в Дели достигла 651 рупии за единицу. По оценкам, совокупные убытки розничных продавцов топлива в период с марта по май составили почти 22 000 крор рупий.

Основные выводы

  • Диверсификация имеет решающее значение: Индия успешно снизила свою зависимость от Ближнего Востока, увеличив импорт из США, Ирана и стран Южной Америки.
  • Экономическая нагрузка на OMCs: Чтобы смягчить удар по потребителям, розничные продавцы топлива взяли на себя последствия резких скачков цен, что привело к расчетным убыткам в размере 22 000 крор рупий в период с марта по май.
  • Изменение спроса: Высокие цены и неопределенность с поставками вызвали значительное падение потребления LPG, особенно в коммерческом и промышленном секторах, наиболее чувствительных к ценам.