New Delhi: India’s liquefied petroleum gas (LPG) market remains deeply import-dependent, with overseas supplies meeting 55–60 per cent of national demand over the past decade despite incremental growth in domestic production, Crisil Intelligence said in a report on Wednesday. A new long-term India–US LPG agreement covering 2.2 million tonnes per annum marks an important shift in the country’s sourcing profile.
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The deal “reduces exposure to traditional Middle Eastern suppliers,” the report said. But it added that landed costs, particularly freight, will be a key determinant of oil marketing companies’ near-term economics.
LPG consumption rose to about 31.3 million tonnes in FY25, up from 21.6 million tonnes in FY17, and is expected to reach 33–34 million tonnes in FY26. Household penetration continues to grow, with Pradhan Mantri Ujjwala Yojana (PMUY) users increasing their average annual refill rate to about 4.5 cylinders in FY25 from 3.9 in FY17.
Non-PMUY households have maintained stable refill levels of 6–7 cylinders a year over the past five years.
Commercial and industrial use now accounts for roughly 16 per cent of total demand, up from about 10 per cent in FY17, driven by rising consumption in food services, institutional kitchens and small manufacturing clusters.
Domestic LPG output rose modestly to about 12.8 million tonnes in FY25 from 11.2 million tonnes in FY17, but supply continues to lag demand. Import volumes climbed to 20.7 million tonnes in FY25 from 11.1 million tonnes in FY17, keeping India’s import reliance at 60–65 per cent.
The structural supply gap is expected to persist through FY26–FY28, Crisil said, as refining additions will bring only marginal improvements in LPG yields.
The Middle East remains India’s dominant source, accounting for 91–93 per cent of FY25 imports — UAE 41 percent, Qatar 22 percent, Saudi Arabia 15 per cent and Kuwait 15 per cent. This high concentration, the report said, “exposes India to regional supply disruptions and limits scheduling flexibility.”
The long-term US supply deal introduces “meaningful geographic diversification,” Crisil said, offering a geopolitical risk-mitigating corridor and expanding optimisation levers in India’s import basket.
Cost dynamics vary substantially by origin. “Middle Eastern cargoes track the Saudi Contract Price (CP), while US shipments follow Mont Belvieu benchmarks, where freight constitutes a larger share of delivered cost,” the report said.
Both benchmarks have softened recently — Saudi CP at its lowest since August 2023 and Mont Belvieu prices easing with seasonal trends — giving Asia-Pacific importers “more favourable sourcing options.”
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With the US tranche positioned as a potential long-term anchor, Crisil said India’s LPG sourcing profile is evolving into a more diversified and resilient framework.
“If volumes under the new deal flow consistently and scale over time, the arrangement could strengthen India’s energy security and reduce systemic reliance on any single region,” it said.