India significantly reshaped its liquefied petroleum gas (LPG) import strategy during the recent conflict in West Asia, reducing its reliance on traditional suppliers in the region and turning to a wider range of countries to secure supplies. The move helped prevent major disruptions in the domestic market, although it also led to increased logistics costs and substantial financial strain on state-owned fuel retailers. Before the geopolitical tensions escalated, nearly 90 per cent of India’s LPG imports originated from West Asian nations, making the country highly vulnerable to supply shocks in the region.
However, a recent Crisil report highlighted a dramatic shift in sourcing patterns. By April 2026, the United States emerged as a key supplier, accounting for almost one-third of India’s LPG imports compared with just 8 per cent in February.
The deal covers 2.2 million tonnes annually, representing around 10 per cent of India’s total requirement.
At the same time, Iran returned to India’s import mix, contributing approximately 6 per cent of shipments in April. Additional volumes were sourced from countries including Argentina, Chile, France and the Netherlands. While this broader procurement network strengthened supply security, it also meant longer transportation routes and higher freight charges.
Demand Slumps As Prices Rise
Despite efforts to maintain adequate supplies, the conflict had a noticeable impact on consumption. LPG demand dropped from 3.2 million tonnes in February to 2.47 million tonnes in April as tighter market conditions and rising costs weighed on usage. The slowdown followed a strong fiscal 2026, when LPG consumption climbed 6 per cent to a record 33.2 million tonnes. However, demand weakened sharply thereafter, falling 13 per cent year-on-year in both March and April before declining 20 per cent in May.
Commercial and industrial consumers were particularly affected. These segments, which are more sensitive to market-driven pricing, reduced consumption more aggressively than households in response to higher fuel costs and supply concerns.
The report noted that the Saudi Aramco Contract Price, the benchmark used for Indian LPG imports, surged 46 per cent between February and June due to supply uncertainties and elevated freight expenses.
However, domestic consumers were largely insulated from the full impact of the increase. In Delhi, the price of a standard 14.2-kg household LPG cylinder rose by only around 10 per cent during the period. In contrast, the price of a 19-kg commercial cylinder jumped more than 79 per cent.
Because household LPG prices remained relatively stable, oil marketing companies absorbed a significant portion of the higher procurement costs. According to the report, under-recoveries on domestic LPG cylinders in Delhi reached Rs 651 per cylinder in May. Total losses incurred by fuel retailers between March and May were estimated at nearly Rs 22,000 crore.
Risks Remain Despite Easing Tensions
With tensions in West Asia showing signs of easing and major trade routes potentially reopening, immediate concerns over LPG availability are expected to recede. Global prices could also moderate in the coming months.
Nevertheless, the episode underscored India’s continued dependence on imported LPG and highlighted the risks associated with concentrated sourcing. While broader import diversification and increased domestic output helped cushion the impact, the sector remains exposed to geopolitical developments, shipping market disruptions and fluctuations in global energy prices.