India's Evolving LPG Landscape: Diversification and Strategic Deals

India's LPG market, heavily reliant on imports, is diversifying with a new USA supply deal worth 2.2 million tonnes annually. While household and industrial LPG consumption rises, import dependency remains due to domestic output lagging. Despite cost concerns, geographic diversification could enhance India's energy security.

India's liquefied petroleum gas (LPG) market is undergoing significant changes with a new long-term supply agreement between India and the USA. This deal, covering 2.2 million tonnes per annum, aims to diversify India's import sources away from traditional Middle Eastern suppliers, according to a report by Crisil Intelligence released on Wednesday.

Despite the country's incremental growth in domestic LPG production, imports have consistently satisfied 55-60% of national demand over the past decade. With LPG consumption projected to reach 33-34 million tonnes in FY26, India remains heavily dependent on imports, primarily from the Middle East, which poses a risk of regional supply disruptions.

The introduction of US supplies adds a new dimension to India's sourcing strategies, potentially enhancing energy security by mitigating geopolitical risks. As both Middle Eastern and US benchmarks have softened, this timing presents more competitive sourcing options for Indian importers. However, landed costs, particularly freight, continue to play a crucial role in determining the financial viability of oil marketing companies.

(With inputs from agencies.)