Invoking emergency powers, India asks oil refiners to ramp up LPG output

Invoking emergency powers, the Indian government has directed state-owned and private oil refineries to ramp up LPG production as it looks to increase the availability of domestic cooking gas to hedge against potential disruptions from the widening Middle East war.

Separately, Indian authorities yesterday (6 March) hiked the prices of domestic LPG and commercial cylinders by Rs60 and Rs114.5, respectively, amid rising energy costs linked to the conflict. This is the second increase in prices in less than a year.

India has 33.08 crore active LPG consumers and the government is looking to maintain an uninterrupted supply, particularly in view of the coming state legislative assembly elections in four key states of Assam, West Bengal, Kerala and Tamil Nadu in April.

India consumes nearly 195 million standard cubic meters of natural gas daily for producing electricity, fertilisers, turning into CNG for automobiles, piping to household kitchens for cooking and use as feedstock in industries ranging from steel to ceramics. Roughly half of this is imported.

The order, issued late on Thursday under the Essential Commodities Act of 1955, asked the refiners to make LPG produced available to three public sector oil marketing companies, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) only.

While India has surplus oil-refining capacity, it is short in LPG production.

"All public and private sector refiners have been asked to maximise and ensure that propane and butane streams produced… are utilised for production of liquefied petroleum gas (LPG)," according to an Indian oil ministry order. Propane and Butane are used for producing LPG.

"All oil refining companies shall not divert, utilise, process, crack, convert or otherwise employ propane or butane stream for the manufacture of petrochemical products or other such downstream derivatives," according to the order. 

The LPG produced is to be sold only to domestic households for use in cooking purposes, it said, adding any violation of the order shall attract penal action.

Earlier, the government had invoked ESMA provisions in the oil sector during the post-Russia-Ukraine war period, asking refiners to ensure domestic fuel availability and not to export, which had become lucrative due to high margins.

Meanwhile, LPG under the recently signed LPG import contract with the United States has also started coming in.

Under the deal, public sector oil companies will import about 2.2 million tonnes of LPG from the US Gulf Coast in 2026 – roughly 10% of the country's annual LPG imports – in a move to diversify energy sources and bolster energy security.

While India has an adequate stock of crude oil (raw material for making petrol and diesel), 30% of gas supplies have been hit.

India's main LNG supplier, Qatar, has shut its liquefied natural gas production facility after being hit by drones and missiles during the ongoing conflict. 

This, together with restrictions on the movement of ships through the Strait of Hormuz between Iran and Oman, has hit the supplies.