Whalesbook
March Consumption Plummets Amid Supply Disruptions
March saw India's Liquefied Petroleum Gas (LPG) consumption fall sharply by 12.8%, dropping to 2.379 million tonnes from 2.729 million tonnes a year earlier. This steep decline was directly linked to supply chain issues caused by the intensified conflict in West Asia, which disrupted key shipping routes like the Strait of Hormuz. Official data showed LPG sales to non-domestic users fell nearly 48%, and bulk LPG sales dropped by a substantial 75.5%. This contradicted earlier government reports of normal supply conditions.
Government Orders Domestic Production Surge
Facing this import-driven supply shock, Indian authorities took decisive action. The government directed refineries to prioritize LPG production, shifting feedstock like propane and butane away from petrochemical manufacturing. This order, issued under emergency powers in the Essential Commodities Act, boosted India's LPG output to 1.4 million tonnes in March 2026, up from 1.1 million tonnes a year prior. To ensure household supply, LPG deliveries to commercial users such as hotels and industries were reduced. This strategic shift aimed to offset disrupted international shipments, highlighting India's significant reliance on imported LPG, which covers about 60-67% of domestic demand, with over 90% historically coming from the Middle East.
Fiscal Year Growth Remains Strong
Despite the sharp fall in March, the overall fiscal year ending March 2026 showed resilience with total LPG consumption growing by a healthy 6% to reach 33.212 million tonnes. This sustained growth is supported by government programs like the Pradhan Mantri Ujjwala Yojana (PMUY), which encourages households to switch from traditional fuels to cleaner options like LPG. This trend underscores the ongoing demand for cleaner cooking fuels in India, even as geopolitical events create short-term supply challenges.
Other Energy Products Show Mixed Trends
Other energy products saw varied performance influenced by regional tensions. Aviation Turbine Fuel (ATF) consumption was flat due to airspace closures. However, demand for transportation fuels remained strong, with petrol sales up 7.6% and diesel consumption up 8.1% in March. For the full fiscal year, petrol and diesel consumption grew 6.5% and 3.6% respectively. Industrial fuels like naphtha and fuel oil saw declines, while bitumen demand modestly increased. The wider energy sector continues to face price volatility and supply concerns from West Asian geopolitical instability, a critical region for India's imports, supplying about 45% of its crude oil and a significant portion of its natural gas.
Long-Term Supply Dependence and Challenges
India's heavy reliance on imported energy, particularly LPG and crude oil, presents ongoing supply risks. With 85-88% of crude oil and around 60-67% of LPG imported, primarily from the Middle East, the Strait of Hormuz remains a critical point of vulnerability for over 90% of Middle Eastern LPG imports. The government's decision to boost domestic LPG production by diverting feedstock from petrochemicals, while necessary for immediate supply, could reduce output of higher-margin petrochemical products. This affects downstream industries such as plastics and packaging. The recovery timeline for disrupted international supply chains remains unclear, with some suggesting it could take years. This dependence means geopolitical events in West Asia can directly impact prices and economic stability across various sectors. While domestic production efforts are vital, they do not fundamentally change India's long-term need for imports, which has grown over the past decade.