Private Station Closures Drive LPG Demand Surge
Following reports of over 300 private auto LPG dispensing stations closing or partially shutting down in Karnataka, Indian Oil Corporation (IndianOil) has significantly boosted its supply operations. The state-run oil company is now the main fuel source for many auto-rickshaws and LPG-powered cars. IndianOil is meeting this demand through its 55 Auto LPG Dispensing Stations (ALDS) across the state. This surge in demand has pushed IndianOil's average daily sales at these stations up to 59.53 metric tonnes (MT), a sharp increase from the previous three-month average of 43.4 MT. The company stated its commitment to providing an uninterrupted and fair supply, as directed by the government.
PSUs' Strong Position in Auto LPG Market
The disruption in Karnataka's auto LPG market highlights the strong position of Public Sector Undertakings (PSUs) in India's energy sector. In 2022, IndianOil held about 38% of India's total petroleum products market share. Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) held 20.1% and 18% respectively. Together, these PSUs controlled an estimated 79.25% of the retail fuel market by 2025. Private players, despite their efforts, manage a much smaller share. IndianOil's extensive infrastructure and supply chain are proving crucial during this period of instability among private operators.
Globally, Auto LPG is the third most popular automotive fuel. However, India's annual consumption is still low compared to its potential. The Indian Auto LPG Coalition (IAC) notes its environmental benefits, including lower CO2, particulate matter, and NOx emissions than petrol and diesel, plus a 40% cost advantage. Yet, Auto LPG in India is not subsidized, unlike electric vehicles (EVs) and Compressed Natural Gas (CNG), which receive government incentives. This policy difference, along with declining sales of Auto LPG vehicles since 2019, challenges its broader adoption. The Karnataka government's recent push for Piped Natural Gas (PNG) for businesses also indicates a trend towards alternative fuels, though auto LPG supply itself is not affected by these specific measures. IndianOil's market capitalization was around ₹1.91 trillion as of April 2026, with a P/E ratio near 5.31. Its stock traded near ₹135.72, within a 52-week range of ₹120.05 to ₹188.90.
Challenges for Auto LPG's Growth
Despite the immediate demand increase and IndianOil's operational capacity, the Auto LPG sector in India faces ongoing challenges. The absence of direct government subsidies, compared to incentives for EVs and CNG, places Auto LPG at a competitive disadvantage. Reports suggest a decline in new Auto LPG vehicle registrations, with some automakers reportedly stopping production of LPG models. While PSUs like IndianOil offer stability, private companies such as Reliance Industries are often seen as more profitable due to greater operational flexibility. Historically, AutoGas prices in Karnataka have varied, with Bengaluru sometimes seeing much higher prices than other cities. This indicates potential cost fluctuations for consumers. The global geopolitical situation, including events in West Asia, highlights the need for secure supply chains, though India has reportedly secured sufficient fuel stocks.
PSUs Poised to Gain Market Share
The current market situation in Karnataka suggests an opportunity for IndianOil and other PSUs to solidify their market position. Their ability to manage demand surges and maintain consistent supply, as shown by the sales increase, reinforces their role as dependable energy providers. While the Indian Auto LPG market has significant growth potential, its expansion depends on government policy, including possible incentives and a clearer regulatory path for vehicle conversions and refueling infrastructure. Successful initiatives like the Ujjwala Yojana, which improved LPG infrastructure nationally, demonstrate the impact of government backing. As India pursues its energy transition, this scenario positions IndianOil to strengthen its foothold in the auto LPG segment, using its scale and infrastructure to gain share from less stable private operators.