India’s LPG dependence on U.S. | Explained
The United States has emerged as India's largest single supplier of Liquefied Petroleum Gas (LPG), with U.S. shipments accounting for a majority share of India's LPG imports by mid-2026, following months of disruption to Gulf-origin shipments
The shift follows escalating instability around the Strait of Hormuz linked to the wider regional conflict involving Iran that began in February 2026, which affected traditional Gulf LPG supply routes
India has secured a long-term arrangement under which state-owned oil marketing companies will import a fixed volume of LPG from the United States through 2026
The government has separately directed domestic refining and petrochemical complexes to maximise LPG output by diverting propane, butane, and related streams into the LPG pool, reporting a 25-28% rise in domestic production as a result
The Strait of Hormuz — Strategic Chokepoint
The Strait of Hormuz is a narrow sea passage between Iran and the Musandam peninsula (Oman/UAE) connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is the world's most critical oil and gas chokepoint: at its narrowest, the strait is about 33 km wide, with shipping lanes further constrained to a few kilometres in each direction.
Key Details
- Roughly a quarter to a third of the world's seaborne crude oil trade transits the Strait
- Around 93% of Qatar's and 96% of the UAE's LNG exports pass through it, representing about 19% of global LNG trade
- Asian economies (China, India, Japan, South Korea) receive the overwhelming majority (around 89%) of crude and condensate that transits the strait, making them disproportionately exposed to any disruption
- Classified by the U.S. Energy Information Administration as the world's most important oil chokepoint, alongside the Strait of Malacca and Bab-el-Mandeb
Disruption risk in the Strait of Hormuz, arising from the 2026 regional conflict, directly threatens India's Gulf-sourced LPG and crude supply lines, forcing the diversification toward non-Hormuz suppliers such as the United States.
India's LPG Import Dependence and Domestic Production
India consumes roughly 31-32 million metric tonnes (MMT) of LPG annually, of which domestic refineries produce only around 12-13 MMT (roughly 40%), leaving approximately 60% of consumption dependent on imports. Historically, the overwhelming majority of these imports (around 90%) originated from Gulf producers and transited the Strait of Hormuz.
Key Details
- Domestic production (FY2024-25): approximately 12.8 MMT against total consumption of approximately 31.3 MMT
- Import dependency: approximately 60% of consumption
- Pre-crisis Gulf share of imports: approximately 90%, mostly transiting the Strait of Hormuz
- Government directive (March 2026) to refineries to maximise LPG yield by diverting propane, butane, propylene, and butene streams reportedly lifted domestic output by 25-28%
The scale of India's import dependence explains why a Hormuz-linked supply shock had an outsized effect on domestic LPG availability, and why diversification toward the U.S. became a priority policy response.
Pradhan Mantri Ujjwala Yojana — Why LPG Security Matters for Welfare Policy
The Pradhan Mantri Ujjwala Yojana (PMUY), launched in May 2016, provides deposit-free LPG connections to women from below-poverty-line households to shift rural and low-income households away from traditional biomass cooking fuels. LPG price and supply stability is therefore not only an energy-security issue but a direct welfare and public-health concern, given PMUY's scale.
Key Details
- Launch year: May 2016; over 10.33 crore (103.3 million) PMUY connections released as of mid-2025
- Ujjwala 2.0 (2021) extended free first refill and stove to beneficiaries, and eased documentation requirements for migrant families
- Central government approved continuation of targeted LPG subsidy for PMUY consumers for 2025-26 at approximately ₹12,000 crore
- Nodal ministry: Ministry of Petroleum and Natural Gas
Any sustained disruption to LPG import supply chains has direct implications for the affordability and availability of cooking gas for tens of millions of PMUY households, linking geopolitical supply-route risk to domestic welfare delivery.
India's Strategic Petroleum Reserve — Comparison with LPG Supply Buffers
India's Strategic Petroleum Reserve, managed by Indian Strategic Petroleum Reserves Limited (ISPRL), stores crude oil (not LPG) in underground caverns at Visakhapatnam, Mangalore, and Padur with a combined capacity of about 5.33 million metric tonnes, providing only around 9-13 days of net import cover — well short of the 90-day benchmark recommended for International Energy Agency (IEA) member countries. India, notably, is an IEA "association country," not a full member, and is not bound by the 90-day requirement.
Key Details
- ISPRL storage sites: Visakhapatnam (1.33 MMT), Mangalore (1.5 MMT), Padur (2.5 MMT)
- Current cover: approximately 9.5 days at full capacity utilisation; India's actual holdings were around 64% of capacity as of March 2026
- IEA benchmark: 90 days of net oil import cover for full members
- LPG, unlike crude, does not currently have an equivalent dedicated strategic reserve in India — supply security instead relies on import diversification, domestic refinery flexibility, and long-term supply contracts
The absence of a dedicated LPG strategic reserve makes import-route diversification (such as the shift to U.S. supply) and refinery-level production flexibility the primary tools available to the government for managing LPG supply shocks, in contrast to crude oil where a (limited) strategic reserve exists.
Diversification of India's Energy Import Basket — A Recurring Pattern
India has diversified its energy import sources multiple times in response to geopolitical shocks, most notably shifting a substantial share of crude oil purchases toward discounted Russian crude after the Russia-Ukraine conflict beginning in 2022. The 2026 LPG shift toward the United States follows a similar logic — reducing overexposure to any single geography or chokepoint.
Key Details
- Post-2022, Russia became India's largest single crude oil supplier by volume, overtaking traditional Gulf suppliers such as Iraq and Saudi Arabia
- The United States, aided by its shale gas and associated natural gas liquids (NGL) production boom, has become a major global LPG (propane and butane) exporter, primarily from Gulf Coast terminals
- India secured a long-term 2026 agreement for state refiners to import a fixed volume (in the low single-digit million tonnes) of LPG from the U.S.
- Separately, government data indicates a growing share of India's crude oil imports are now routed via paths that avoid the Strait of Hormuz altogether, reflecting a broader risk-mitigation strategy across the energy import basket
The LPG shift toward the U.S. is best understood not as an isolated event but as part of a consistent Indian energy-security strategy of avoiding concentration risk in any single supplier region or transit chokepoint.
- India's annual LPG consumption: approximately 31-32 MMT; domestic production covers approximately 40% (about 12.8 MMT)
- Import dependency for LPG: approximately 60% of consumption
- Pre-2026 Gulf share of LPG imports: approximately 90%, mostly via the Strait of Hormuz
- Strait of Hormuz: narrowest point approximately 33 km; carries roughly a quarter to a third of world seaborne oil trade
- India's Strategic Petroleum Reserve (ISPRL): 5.33 MMT capacity across Visakhapatnam, Mangalore, and Padur; approximately 9.5 days of cover (crude only, not LPG)
- IEA recommended reserve benchmark: 90 days of net import cover (India, an IEA association country, is not bound by this)
- PMUY: launched May 2016; approximately 10.33 crore beneficiary connections as of mid-2025; ₹12,000 crore targeted subsidy approved for 2025-26
- Government measures (March 2026) reportedly raised domestic LPG production by 25-28% through refinery stream diversion