LPG domestic production mandates: Can it reduce India's dependence on volatile Middle East imports?

India’s recent move to boost domestic production of liquefied petroleum gas (LPG) is a step towards reducing dependence on imports of the critical cooking fuel. The maximum daily LPG production target has been set at 63,810 tonnes across state-run and private refineries, as well as upstream and gas-processing companies. This came after the Iran-US-Israel war and the Strait of Hormuz disruptions highlighted the fragility of India’s dependence on imported LPG. The government's plan is to maximise domestic LPG production so that India can cushion future supply shocks. Production targets will be reviewed in January and July.

Ubiquitous, useful but unreliable? LPG is India’s main cooking fuel

With more than 330 million active domestic connections, including over 100 million under the Pradhan Mantri Ujjwala Yojana (PMUY), India’s LPG consumption has grown over the past decade. Household users account for about 87 per cent of total LPG consumption, making stable LPG supplies critical for millions of Indian families. In FY 2025-26, India consumed around 33.2 million tonnes of LPG, which works out to around 91,000 tonnes per day.

Domestic production was only about 13.1 million tonnes, or around 35,900-36,000 tonnes a day. This highlights India’s heavy import dependence: more than 64 per cent of the country’s requirements, or approximately 21.3 million tonnes, came from overseas sources.

Clearly, LPG demand has grown faster than domestic production.

Before the recent disruptions, up to 92 per cent of India’s LPG imports came from the Middle East, mainly from the United Arab Emirates (UAE), which accounted for around 40-41 per cent, and Qatar, at about 22 per cent. Saudi Arabia and Kuwait each accounted for around 15 per cent.

A major push for domestic LPG production: But will it succeed?

India’s domestic LPG production stood at around 36,000 tonnes a day. The new maximum production target of 63,810 tonnes a day is more than double that level. If fully achieved, it would equal roughly 70 per cent of current daily consumption and could dramatically narrow the supply gap during a crisis. However, the target is a maximum or potential framework that can be used to boost supplies during shortages or disruptions, and not a permanent daily production requirement.

Actual output will depend on the technical and economic feasibility of increasing LPG recovery at individual facilities. LPG production at refineries will have to be balanced against the production of other products, such as petrol and petrochemicals.

Adequate storage, evacuation facilities, rail connectivity and road tanker capacity will also be essential to ensure that additional LPG reaches consumers.

In recent months, refiners have already demonstrated that domestic production could be raised from pre-war levels of around 36,000 tonnes a day to approximately 55,000 tonnes a day. The new ceiling of 63,810 tonnes provides additional headroom.

It is not an overnight solution. Imports will still be needed to meet India’s full daily requirement for LPG.

If domestic production increases, it could reduce the risk of long queues, delayed cylinder deliveries and localised shortages. Households may also be less likely to shift temporarily to alternatives such as biomass or kerosene.

Domestic LPG production is useful only if the additional volumes can be stored, transported and distributed efficiently.

Who will help increase domestic LPG production?

Reliance Industries has received the largest individual allocation under the framework. Its domestic-market-focused Jamnagar refinery has been assigned a maximum production target of 18,000 tonnes of LPG a day. Its export-oriented special economic zone unit is exempt from the allocation.

Public-sector refineries collectively account for around 31,470 tonnes a day across 18 facilities.

Upstream and gas-processing companies, including Oil and Natural Gas Corporation (ONGC), Oil India Limited (OIL) and GAIL (India) Limited, have been assigned a combined target of about 6,460 tonnes a day. These companies can contribute LPG recovered during natural gas processing and associated production.

Other private refiners will contribute as well. Nayara Energy’s Vadinar refinery, for example, has an allocation of around 4,480 tonnes a day.

Can India reduce its Middle East dependence?

Increasing domestic output can be only one part of the strategy.

India is also diversifying its overseas suppliers to reduce its dependence on a single region. Sourcing LPG from the US and exploring supplies from countries such as Algeria, Norway and Oman can provide alternatives to traditional Gulf suppliers and reduce exposure to disruptions in the Middle East.

Diversification can also broaden India’s pricing options. US LPG is linked to the Mont Belvieu benchmark, offering an alternative to the Gulf-linked pricing mechanisms that have traditionally influenced India’s import costs.

Import dependence is likely to remain significant for years

Even if the new maximum domestic production target is fully utilised, it would cover only around 70 per cent of present daily consumption. Demand is also continuing to grow, while additions to refining capacity do not necessarily translate into equivalent increases in LPG output.

India is therefore not moving towards complete LPG import independence in the immediate future. Instead, the strategy is to reduce vulnerability by combining higher domestic production, stronger storage and transportation infrastructure, and a more geographically diversified import basket.

For Indian households, the most immediate benefit could be greater protection against sudden supply shocks. The measures should make extreme shortages and prolonged delivery delays less likely during future disruptions, even as India continues to rely on imports to meet a substantial share of its LPG demand.