What Happened
- The ongoing U.S.-Israel-Iran conflict has sharply disrupted India's liquefied petroleum gas (LPG) supply lines, which depend heavily on Gulf imports transiting the Strait of Hormuz.
- Around 37 Indian oil and LPG tankers were reported stranded near the Strait of Hormuz as hostilities escalated, causing supply shortages for commercial and household users.
- Domestic LPG cylinder prices have risen by ₹60 for household cylinders and ₹115 for commercial cylinders, with oil marketing companies (OMCs) — Indian Oil, BPCL, and HPCL — absorbing a significant portion of the increased procurement costs.
- The government invoked emergency sourcing measures; Indian PSU oil companies have signed agreements to import approximately 2.2 million tonnes of LPG from the U.S. Gulf Coast for 2026 to partially compensate for Middle East supply gaps.
- Alternative sources being evaluated include Norway and the United States, though greater shipping distances add logistical complexity and cost.
Static Topic Bridges
India's LPG Import Dependence Structure
India is the world's second-largest importer of LPG. Domestic production covers only about 40% of the country's requirement, making India structurally reliant on imports for the remaining 60%. The bulk of these imports originate from Gulf producers — primarily Saudi Arabia, Qatar, and the UAE — and transit through the Strait of Hormuz. An estimated 85–90% of India's LPG imports pass through this narrow maritime chokepoint, which is approximately 33 km wide at its narrowest point.
- India imports roughly 60% of its total LPG consumption annually.
- About 60% of India's overall oil imports come from the Middle East, making Hormuz disruptions a systemic risk.
- Domestic LPG is predominantly used for cooking fuel; over 31 crore active LPG connections exist across the country as of 2025.
- In 2026, India secured a 2.2-million-tonne LPG supply deal with U.S. Gulf Coast suppliers as a partial hedge.
Connection to this news: The conflict's disruption of the Strait of Hormuz directly cuts off the primary import route for India's LPG, turning what was a diversified supplier base into a concentrated geographic vulnerability.
Pradhan Mantri Ujjwala Yojana (PMUY) and Cooking Fuel Access
Launched in May 2016 under the Ministry of Petroleum and Natural Gas, the Pradhan Mantri Ujjwala Yojana aims to provide free LPG connections to women from Below Poverty Line (BPL) households, replacing traditional biomass-based cooking fuels that cause indoor air pollution. As of July 2025, 10.33 crore PMUY connections are active across the country. The scheme has contributed to a significant rise in LPG consumption among lower-income households, with per capita refills rising from 3.01 in FY2020 to 4.34 on a pro-rata basis in FY2025.
- Cabinet approved continuation of targeted PMUY subsidies of ₹12,000 crore for 2025-26.
- The scheme is funded through the Ministry of Petroleum and Natural Gas; PMUY beneficiaries receive a subsidised refill rate.
- Approximately 222 crore LPG refills have been delivered to PMUY households since inception.
- Daily LPG refill demand for PMUY households stands at approximately 13 lakh refills per day.
Connection to this news: With LPG import disruptions raising prices, the subsidy burden on OMCs and the government increases sharply — directly affecting the fiscal sustainability of welfare schemes like PMUY that depend on affordable LPG availability.
The Strait of Hormuz as an Energy Chokepoint
The Strait of Hormuz, located between the Sultanate of Oman and Iran, is the world's most critical maritime oil and gas transit chokepoint. About one-fifth of global LNG trade and nearly one-third of global seaborne oil trade passes through this 33-km-wide strait. Any disruption — through mining, naval blockade, or conflict — sends immediate shocks through global energy markets. The EIA has repeatedly flagged the Strait as a single point of failure for global energy supply chains, with no viable pipeline alternative capable of replacing its full throughput.
- Nearly 20–21 million barrels of oil per day transited the Strait of Hormuz in recent years.
- Bangladesh, India, and Pakistan together imported nearly two-thirds of their total LNG via this route in 2025.
- India has been working to secure non-Hormuz supplies from Australia, the U.S., and Russia as alternate LNG corridors.
- Iran controls the northern coastline of the strait, giving it significant leverage in any conflict escalation.
Connection to this news: The U.S.-Israel-Iran conflict has materialized the long-standing Hormuz risk for India, turning theoretical energy security vulnerability into an immediate supply crisis affecting both LPG and LNG.
Oil Marketing Companies (OMCs) and Under-Recovery Mechanism
India's three state-owned oil marketing companies — Indian Oil Corporation (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) — are responsible for retail pricing and distribution of LPG, petrol, and diesel. When global commodity prices rise and the government restrains retail price hikes for social or political reasons, OMCs absorb losses termed "under-recoveries." The government may compensate OMCs through budgetary support, but in recent years OMCs have frequently been asked to bear under-recoveries on their balance sheets, affecting profitability and capital expenditure capacity.
- OMCs set LPG retail prices based on import parity plus OMC margins; government approval is needed for significant hikes.
- Under-recovery on LPG has historically varied from a few hundred rupees to over ₹300 per cylinder during high crude price periods.
- All three OMCs are listed on stock exchanges; sustained under-recoveries affect shareholder value and PSU dividends to the government.
- The government ordered OMCs to source all domestic LPG output from Reliance Industries directly under the 2026 emergency order.
Connection to this news: With import prices spiking due to Hormuz disruptions and the government hesitant to pass the full cost to consumers, OMCs are bearing the financial brunt of the LPG supply crisis — raising fiscal and corporate governance questions.
Key Facts & Data
- India imports approximately 60% of its LPG requirements; 85–90% of those imports transit the Strait of Hormuz.
- Domestic LPG prices rose ₹60 per household cylinder and ₹115 per commercial cylinder amid the supply crunch.
- India signed agreements for 2.2 million tonnes of LPG from U.S. Gulf Coast suppliers for 2026 as an emergency measure.
- India has 10.33 crore active PMUY connections (as of July 2025), making affordable LPG a major welfare priority.
- 37 Indian oil and LPG tankers were reported stranded near the Strait of Hormuz at the peak of the disruption.
- India is the world's second-largest LPG importer.
- The Strait of Hormuz is approximately 33 km wide at its narrowest point and handles roughly one-fifth of global LNG trade.
- Saudi Arabia, Qatar, and the UAE are India's primary LPG source countries.