India has significantly altered its liquefied petroleum gas (LPG) import strategy amid ongoing geopolitical tensions in West Asia. The country has increased its purchases from the United States,Iran, and other nations, aiming to lessen its reliance on Gulf region, which has traditionally supplied nearly 90% of its LPG needs.
A report from Crisil reveals that by April 2026,the U.S. is projected to provide about one-third of India's LPG imports, a drastic rise from just 8% in February. This shift follows a 22 million tonne per annum supply agreement established between India and the U.S. in late 2025,which accounts for roughly 10% of India's annual LPG requirements. Iran has also re-entered market, contributing nearly 6% of imports in April. Additionally, India has sourced LPG from countries like Argentina,Chile,France,and Netherlands.
While this diversification has bolstered supply security during the conflict, it has also led to longer shipping routes and increased transportation costs. The impact of these disruptions has been felt domestically, with India's LPG consumption dropping to 24.7 million tonnes in April from 32 million tonnes in February. This decline is attributed to rising prices and supply constraints affecting demand.
After reaching record 33.2 million tonnes in FY26,representing 6% annual growth, LPG consumption has sharply decreased in subsequent months. Year-on-year demand fell by 13% in both March and April, followed by a steeper 20% drop in May. Commercial and industrial consumers faced brunt of these changes, as they are more sensitive to market-linked pricing. In contrast,household demand remained relatively stable, aided by minimal increases in retail cooking gas prices.
The ongoing conflict has also driven global LPG prices upward,with Saudi Aramco Contract Price, the benchmark for Indian imports, surging by 46% between February and June due to concerns over supply disruptions and rising freight costs . Despite this spike,domestic household LPG prices experienced only a modest rise. In Delhi,the cost of a 14.2 kg domestic LPG cylinder increased by around 10%,while the price of a 19 kg commercial cylinder soared by more than 79%.
This restrained increase in household LPG prices has resulted in significant underrecoveries for oil marketing companies. Crisil estimates that underrecoveries on domestic cylinders in Delhi reached ₹651 per cylinder in May. Cumulative losses for state-owned fuel retailers from March to May are projected to approach ₹22,000 crore .
