India is currently grappling with a significant liquefied petroleum gas (LPG) supply gap, reportedly facing a daily deficit of 400,000 barrels. This substantial shortfall has emerged due to disruptions in traditional import routes and the nation's struggle to secure alternative sources.
Strait of Hormuz Closure Impacts Imports
According to a report by Nikkei Asia, citing Kpler data, India's LPG imports plummeted to 377,620 barrels per day (bpd) in April. This marks a sharp decline from February's figures of 851,870 bpd, a period when the Strait of Hormuz was fully operational. The closure of the crucial strait, reportedly by Tehran in response to a US-Israel attack on Iran, has severely impacted the flow of LPG from key Middle Eastern suppliers.
Domestic Production and Government Measures
Despite the import challenges, India's domestic LPG production reached approximately 530,000 bpd in April, operating at near full capacity. To mitigate the supply crunch and manage demand, the Indian government has implemented several measures. It has urged households with piped natural gas (PNG) connections to surrender their LPG subscriptions within a three-month period, enforcing a 'one household, one connection' rule to prevent the same household from holding both PNG and subsidized domestic LPG.
Additionally, the government increased the price of regular 14.2-kg LPG cylinders by ₹60 in early March, signaling efforts to rationalize consumption and potentially reduce subsidy burdens.
Stock Levels and Import Dependency
As of May 11, India maintained 45 days of rolling LPG stock. In contrast, the country held 60 days' worth of crude oil and natural gas stocks each. India does not maintain long-term strategic reserves for LPG, making it highly reliant on imports, which account for roughly two-thirds of its total needs.
Traditionally, approximately 80 percent of India's LPG imports originate from the United Arab Emirates, Qatar, Kuwait, and Saudi Arabia. These four Middle Eastern suppliers collectively dispatched around 678,000 bpd before the recent disruptions.
Challenges in Diversifying Supply
In an effort to diversify its LPG procurement, India has begun sourcing from countries like Iran, Australia, Argentina, and Chile. In April, these new suppliers contributed 43,000 bpd, a significant increase from zero in February. The United States also exported 149,000 bpd to India in April.
However, diversifying supply comes with its own set of challenges. The volumes from these new sources are considerably smaller compared to the Middle Eastern giants. Furthermore, geographical distance plays a critical role, with Australian supplies taking about 20 days to reach India, while shipments from Argentina and the United States can take a much longer 35-45 days, adding to logistical complexities and costs.