(Image: DhruvStar Industry Insights | Original Artwork)
India’s public-sector oil companies have finalised a one-year structured contract to import about 2.2 MTPA (Million Tonnes Per Annum) of LPG from the US Gulf Coast for 2026. This volume accounts for nearly 10% of India’s annual LPG imports and represents the first structured long-term arrangement of this kind with the United States.
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Diversification of LPG Sourcing
The agreement is a step in the effort to diversify LPG supply sources and improve price stability. Discussions held with major US producers, using Mont Belvieu as the pricing benchmark, led to the completion of this contract.
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Support to Households Through Subsidies
Even with a sharp rise in global LPG prices, Ujjwala households continued to receive cylinders at INR 500-550, despite the actual cost being above INR 1,100. The difference was covered through central government support, with total spending exceeding INR 40,000 crore, enabling low-income families to maintain affordable access to LPG.
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Strengthening Energy Security and Access
The new sourcing arrangement is designed to enhance long-term energy security and ensure reliable access to clean cooking fuel for millions of households across the nation.
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LPG Consumption in India
- Households account for ~90% of India’s LPG consumption, with the remaining 10% used in industrial, commercial, and automotive applications.
- India’s overall LPG consumption in 2024 reached approximately 31 million tonnes, representing a year-on-year increase of about 7%.
- Per-capita domestic LPG cylinder consumption (14.2 kg cylinders) increased from 3.01 cylinders in 2019-20 to 3.95 cylinders in 2023-24.
- The packed domestic segment accounted for around 86% of total LPG sales in India during a recent period.
DhruvStar Industry Insights: What it Means for the Indian Industry
- Leveraging Long-Term Supply Stability: Structured LPG import contracts can help stabilise domestic supply, allowing downstream companies, distributors and logistics players to plan inventory and infrastructure more efficiently.
- Strengthening Price Risk Management: Benchmark-linked sourcing (such as Mont Belvieu pricing) underscores the need for enhanced hedging tools, improved forecasting models, and diversified procurement strategies throughout the oil and gas value chain.
- Boosting Domestic Manufacturing Opportunities: A predictable LPG supply environment supports ancillary industries such as cylinder manufacturing, valve makers, bottling plants and safety equipment, creating opportunities for MSMEs to integrate more deeply into the supply chain.
Sources
[1] PIB
[2] Petroleum Planning & Analysis Cell, Ministry of Petroleum and Natural Gas
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