What Happened
- The ongoing US-Israel war on Iran (Operation Epic Fury, launched February 28, 2026) triggered a closure of the Strait of Hormuz by Iran, causing a severe LPG cylinder shortage across India.
- With approximately 92% of India's LPG imports sourced from Gulf countries — primarily the UAE, Saudi Arabia, Qatar, and Kuwait — the Strait closure disrupted almost all seaborne LPG supply chains simultaneously.
- Black marketing surged; cylinder prices rose with some reports of a Rs 60 (7%) increase per 14.2 kg cylinder. Eateries, hostels, temple kitchens, and small food businesses were forced to reduce operations or shut temporarily.
- The government ordered refineries to halt petrochemical production and redirect all propane and butane output toward LPG manufacturing for household use.
Static Topic Bridges
India's LPG Supply Chain and Gulf Dependence
India is the world's second-largest LPG consumer. India imported 20.67 million tonnes of LPG in FY2024-25, compared to 14.81 million tonnes in FY2019-20 — a 39.6% increase in five years. About 92% of these imports originate from Gulf countries (UAE, Qatar, Saudi Arabia, Kuwait, Bahrain, Oman), and virtually all of these shipments transit through the Strait of Hormuz.
- LPG is composed of propane and butane — by-products of crude oil refining and natural gas processing.
- India has limited domestic LPG production (primarily from ONGC and Oil India's gas fields); production covers only ~40% of consumption demand.
- Household LPG coverage increased from ~62% in 2016 to over 95% by 2026, driven by Pradhan Mantri Ujjwala Yojana (PMUY). India now has over 33 crore LPG connections, including 10+ crore under PMUY.
- The transformation to LPG from biomass fuels reduced indoor air pollution but simultaneously created a concentrated import dependency vulnerability.
Connection to this news: The scale of India's reliance on Gulf-sourced LPG through the Strait of Hormuz means that a conflict-driven closure of even temporary duration immediately translates into domestic shortages — exposing the structural vulnerability built over a decade of rapid LPG adoption.
Pradhan Mantri Ujjwala Yojana (PMUY)
PMUY was launched in May 2016 to provide free LPG connections to women from Below Poverty Line (BPL) households, enabling transition from solid biomass fuels (firewood, cow dung cakes, coal) to clean cooking fuel. The scheme has been a flagship initiative for clean energy access.
- Launched: May 2016, Ministry of Petroleum and Natural Gas.
- Target beneficiaries: BPL households, especially women.
- Phase 1 target: 5 crore connections; Phase 2 (PMUY 2.0, 2021): additional 1 crore migrant households.
- Total connections under PMUY: over 10 crore by 2026.
- Subsidy mechanism: The Cabinet approved Rs 300 per 14.2 kg cylinder for up to 12 refills per year for PMUY beneficiaries; total subsidy outlay was Rs 12,000 crore for FY2024-25.
- Health benefits: LPG replaces solid fuel combustion, significantly reducing household air pollution (HAP) which is linked to respiratory and cardiovascular diseases.
Connection to this news: The LPG shortage disproportionately affects PMUY beneficiaries — low-income households with limited capacity to absorb price shocks or switch to alternative fuels — making energy security a social equity issue, not just an economic one.
Petroleum Pricing and Subsidy Mechanisms
LPG pricing in India involves both market-determined and subsidised components. The government periodically revises the price of domestic LPG cylinders (14.2 kg), while commercial cylinders (19 kg, used by hotels and restaurants) are fully market-linked. The subsidy on domestic cylinders is channelled through Direct Benefit Transfer (DBT) — cash transferred directly to beneficiary bank accounts (PAHAL scheme).
- DBT for LPG (PAHAL scheme): One of the world's largest DBT programmes; eliminated targeting leakages by linking Aadhaar to beneficiary accounts.
- LPG pricing is governed by the Ministry of Petroleum and Natural Gas.
- Oil Marketing Companies (OMCs) — Indian Oil, HPCL, BPCL — are responsible for procurement, storage, distribution, and retail pricing of LPG.
- During supply crises, the government can invoke Essential Commodities Act to control hoarding and black marketing.
Connection to this news: When LPG supply collapsed due to the Hormuz crisis, the subsidy and pricing mechanisms could not compensate for physical unavailability. The shortage exposed the limits of demand-side subsidies in a supply disruption scenario, prompting the government to redirect refinery output.
Key Facts & Data
- 92% of India's LPG imports originate from Gulf countries, almost all transiting through the Strait of Hormuz.
- LPG imports FY25: 20.67 million tonnes (up 39.6% from FY20's 14.81 MT).
- India has 33+ crore LPG connections; 10+ crore under PMUY.
- PMUY launched: May 2016; covers BPL women households.
- PMUY subsidy: Rs 300/cylinder, up to 12 refills/year; FY25 outlay: Rs 12,000 crore.
- LPG cylinder price increase during crisis: ~Rs 60 per 14.2 kg cylinder (approximately 7%).
- Government response: refineries redirected from petrochemicals to LPG production.
- Essential Commodities Act can be invoked to curb hoarding.