The recent long-term LPG procurement agreement with the US is a strategic step for supplier diversification, but higher freight costs due to the longer shipping distance could make imports slightly more expensive for oil marketing companies in the short term.
India remains heavily dependent on LPG imports, which currently meet 55–60% of demand despite steady growth in domestic production. Import reliance has risen to 66% in fiscal 2025 from 51% in fiscal 2017, according to a Crisil report.
The Indo-US deal, covering the import of 2.2 million tonnes per year, reduces India’s historical dependence on Middle Eastern suppliers. While the agreement provides strategic advantages, freight-linked landed costs may affect near-term economics for oil marketers.
Diversifying the source market to include the US mitigates concentration risks and allows greater optimization across India’s import mix. Costs will vary depending on the route and origin: Middle Eastern LPG follows the Saudi contract price benchmark, while US cargoes are priced against Mont Belvieu rates, where freight has a proportionally larger impact.
Saudi LPG prices have declined to their lowest since August 2023 amid weakening global demand, and Mont Belvieu benchmarks have also dropped seasonally. These developments give Indian importers two competitive pricing options, supporting cost optimization and enhancing supply resilience.
The US supply is expected to become a stable anchor in India’s import basket, strengthening long-term energy partnerships if flows remain consistent and potentially expand.
LPG consumption in India rose to 31.3 million tonnes in fiscal 2025 from 21.6 million tonnes in fiscal 2017, and is projected to reach 33–34 million tonnes in fiscal 2026. Growth is driven by higher refill intensity, with subsidized households increasing annual LPG refills from 3.9 to 4.5 cylinders, while regular refills remain at 6–7 cylinders per household.
The commercial and industrial share of LPG has grown to 16% in fiscal 2025 from 10% in 2017, reflecting rising adoption in food services, institutional kitchens, and small-scale manufacturing.
Domestic LPG production increased modestly to 12.8 million tonnes in fiscal 2025 from 11.2 million tonnes in 2017, but supply growth has lagged behind demand, keeping import dependence high at 60–65%. Import volumes rose to 20.7 million tonnes in fiscal 2025 from 11.1 million tonnes in 2017. This structural gap is expected to persist through 2026–28, as incremental improvements in LPG yield remain limited despite new refining capacity.
Traditionally, Middle Eastern countries have dominated LPG imports, accounting for 91–93% of total volumes in fiscal 2025 (UAE 41%, Qatar 22%, Saudi Arabia 15%, Kuwait 15%). Such concentration exposes India to regional supply disruptions, including maintenance schedules and shipping constraints, which can limit flexibility and tighten short-term procurement.
