India Expands LPG Import Sources Amid West Asia Crisis; OMCs Bear Rs 22,000 Crore Losses

New Delhi: India significantly diversified its liquefied petroleum gas (LPG) imports during the recent conflict in West Asia, increasing purchases from the United States, Iran, and several other countries to reduce its dependence on Gulf suppliers, according to a report by Crisil.

Traditionally, nearly 90 per cent of India's LPG imports have come from West Asia. However, geopolitical tensions disrupted supplies, prompting a major shift in sourcing. By April 2026, the United States accounted for almost one-third of India's LPG imports, up sharply from just 8 per cent in February.

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The shift was supported by a 2.2 million tonnes per annum LPG supply agreement signed between India and the United States in late 2025. The deal is expected to meet around 10 per cent of India's annual LPG import requirement.

Iran also re-entered India's import basket, contributing nearly 6 per cent of LPG imports in April. India further diversified its supplies by importing LPG cargoes from Argentina, Chile, France, and the Netherlands.

While the strategy helped ensure uninterrupted fuel supplies during the conflict, it also increased transportation costs because of longer shipping routes.

The report noted that higher global prices and supply constraints affected domestic demand. India's LPG consumption declined from 3.2 million tonnes in February to 2.47 million tonnes in April.

After reaching a record 33.2 million tonnes in FY26, reflecting 6 per cent annual growth, LPG demand weakened considerably. Consumption dropped 13 per cent year-on-year in both March and April, followed by a steeper 20 per cent decline in May.

Commercial and industrial consumers were hit the hardest as they pay market-linked prices and were more sensitive to rising costs. Household demand remained relatively stable because domestic cooking gas prices increased only modestly.

According to Crisil, the Saudi Aramco Contract Price, the benchmark used for India's LPG imports, surged 46 per cent between February and June due to concerns over supply disruptions and higher freight charges.

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Despite the sharp rise in international prices, the retail price of a 14.2-kg domestic LPG cylinder in Delhi increased by only about 10 per cent during the period. In contrast, the price of a 19-kg commercial LPG cylinder jumped by more than 79 per cent.

The limited increase in household LPG prices significantly widened the under-recoveries of state-owned oil marketing companies (OMCs), as procurement costs far exceeded retail selling prices.

Crisil estimated that under-recoveries on each domestic LPG cylinder in Delhi reached Rs 651 in May. As a result, cumulative losses incurred by state-owned fuel retailers during the March-May period climbed to nearly Rs 22,000 crore.

With inputs from IANS

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