Current Affairs Topics Archive
International Relations Economics Polity & Governance Environment & Ecology Science & Technology Internal Security Geography Social Issues Art & Culture Modern History

India issues orders to oil refineries to increase LPG production

March 09, 2026 5 min read Economics Polity & Governance GS2 (Government Policies Polity) GS3 (Energy Security Indian Economy)
On This Page ▼

What Happened

  • The Ministry of Petroleum and Natural Gas issued orders on March 5-6, 2026, directing all oil refineries — both public and private sector — to maximise LPG production using available propane and butane streams.
  • The government invoked powers under the Essential Services Maintenance Act (ESMA) to make the orders legally enforceable, directing that propane and butane streams cannot be diverted to petrochemical or other downstream use.
  • The orders were triggered by India's growing domestic LPG supply risk, as approximately 85-90% of India's LPG imports originate from countries routing through the Strait of Hormuz, which Iran has effectively closed.
  • India consumed 31.3 million tonnes of LPG in FY25; domestically, only 12.8 million tonnes were produced — leaving approximately 18.5 million tonnes to be imported.
  • Public sector oil companies have signed contracts to import approximately 2.2 million tonnes of LPG from the US Gulf Coast in 2026, representing roughly 10% of annual imports — part of an accelerated supply diversification drive.
  • The government also moved to curb LPG hoarding by increasing the minimum booking gap between successive cylinders to 25 days.

Static Topic Bridges

The Essential Services Maintenance Act (ESMA) is a central legislation that enables the Government of India to prohibit strikes in essential services and direct production/service delivery when national welfare demands it. There are two relevant central laws: the ESMA 1968 and the ESMA 1981.

  • ESMA is enacted under the Concurrent List (List III, Seventh Schedule of the Constitution) — both Parliament and State Legislatures can legislate on it, with central law prevailing in case of conflict (Article 254).
  • "Essential services" under ESMA include establishments engaged in production, delivery, or distribution of petroleum, coal, electricity, steel, or fertiliser — explicitly covering oil refineries.
  • The Central Government may, by Order, direct how essential services are to be operated in the national interest, including mandating production volumes and prohibiting diversion of materials.
  • An ESMA order is initially valid for 6 months and can be extended by another 6 months.
  • Violations: Starting an illegal strike or non-compliance can attract imprisonment up to 6 months, a fine up to ₹1,000, or both.
  • States also have their own ESMA legislation with slight variations — applicable to state-level utilities.

Connection to this news: The government's invocation of ESMA to direct refinery LPG production represents a rare use of emergency industrial powers during a peacetime supply crisis — reflecting the seriousness of the supply risk from the Hormuz closure.

India's LPG Sector — Pahal Scheme and Energy Access

Liquefied Petroleum Gas (LPG) is the primary cooking fuel for approximately 340 million households in India, making its supply security a direct welfare and food security issue. The government has actively promoted LPG access through several flagship schemes.

  • Pradhan Mantri Ujjwala Yojana (PMUY): Launched May 2016; provides free LPG connections to Below Poverty Line (BPL) households. Target: 80 million connections by 2020 (later expanded to 90 million+). Nodal ministry: Ministry of Petroleum and Natural Gas.
  • Pahal (DBTL — Direct Benefit Transfer for LPG): Replaced the earlier subsidy system; LPG subsidy transferred directly to Aadhaar-linked bank accounts of consumers. World's largest cash transfer scheme by beneficiary count at launch.
  • As of FY25, approximately 340 million LPG connections exist in India (across urban and rural households).
  • Three public sector Oil Marketing Companies (OMCs) distribute LPG: Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL).
  • LPG prices are deregulated for market-priced cylinders above the subsidised quota; subsidised cylinders (14.2 kg) are provided at controlled rates.

Connection to this news: With 340 million households dependent on LPG for cooking, any supply disruption carries direct food security and welfare implications — explaining the urgency of ESMA-backed production orders. A shortage would disproportionately affect rural and lower-income households where no alternatives exist.

India's Hydrocarbon Supply Chain — Refining to Retail

India's downstream petroleum sector is one of the largest and most integrated in Asia. Crude oil arrives at port terminals, is refined into petroleum products (petrol, diesel, LPG, ATF, naphtha, etc.) at domestic refineries, and then distributed through retail networks. The production mix at each refinery can be adjusted ("product slate optimisation") within limits imposed by crude type and refinery configuration.

  • India's refining capacity: approximately 254 MTPA, operated by 23 refineries (as of 2025). Key refineries: IOC Panipat (25 MTPA), Reliance Jamnagar (two refineries totalling ~68.2 MTPA — world's largest single refining complex), BPCL Kochi, HPCL Vizag.
  • LPG is produced at refineries as a by-product of crude distillation — specifically from propane and butane fractions of the crude oil feedstock.
  • The LPG yield from crude refining can be marginally increased by adjusting the "cut point" in distillation columns and diverting propane/butane streams from petrochemical feedstock use to LPG production.
  • India's domestic LPG production (FY25): 12.8 million tonnes of a total consumption of 31.3 million tonnes — a supply gap of approximately 18.5 million tonnes met by imports.
  • LPG imports sourced mainly from: Saudi Arabia (Aramco), UAE, Qatar, Kuwait — all Hormuz-dependent.
  • US Gulf Coast LPG import contract (2026): ~2.2 million tonnes (~10% of annual imports) — an alternative non-Hormuz source.

Connection to this news: The government's order to maximise LPG production exploits the limited flex available in domestic refinery product slates, while simultaneously accelerating import diversification toward non-Hormuz sources (US Gulf Coast). Together, these are emergency hedges against a sustained Hormuz closure.

Key Facts & Data

  • India's LPG consumption (FY25): 31.3 million tonnes total; domestic production: 12.8 million tonnes; import gap: ~18.5 million tonnes.
  • 85-90% of India's LPG imports originate from Hormuz-dependent producers (Saudi Arabia, UAE, Kuwait, Qatar).
  • US Gulf Coast LPG import contract (2026): ~2.2 million tonnes (~10% of annual imports).
  • ESMA Order duration: 6 months initially, extendable by another 6 months.
  • Ujjwala Yojana (PMUY): launched May 2016; 90 million+ free LPG connections to BPL households.
  • Pahal/DBTL: LPG subsidy directly transferred to Aadhaar-linked bank accounts.
  • India's total LPG connections: ~340 million (FY25).
  • India's refining capacity: ~254 MTPA across 23 refineries.
  • ESMA is legislated under the Concurrent List (Schedule VII) of the Constitution.
  • Booking gap for LPG cylinders raised to 25 days (from standard 21 days) to curb hoarding.