Whalesbook
LPG Crisis Halts Coimbatore Businesses
Coimbatore's industrial heartland is facing a severe operational crisis. Nearly 30% of its Micro, Small, and Medium Enterprises (MSMEs) have stopped operations due to an acute shortage of Liquefied Petroleum Gas (LPG). Major suppliers halted commercial cylinder supply on March 9, 2026, causing an immediate production halt for many businesses. The disruption significantly impacts sectors that heavily depend on LPG, including fabrication, laser cutting, powder coating, textile processing, foundries, and food processing. These industries typically use about 1.2 lakh 19kg cylinders monthly. The scarcity has driven prices sky-high, with a 19kg cylinder reportedly selling for up to Rs 4,500 in some areas, a sharp rise from its usual Rs 1,800 price. This supply shock puts the livelihoods of an estimated four lakh workers at risk. The sector's heavy reliance on imported fuels like LPG, with nearly 60% of its supply coming from abroad, makes it particularly vulnerable to geopolitical instability and volatile global prices.
Soaring Raw Material Prices Add to Crisis
The LPG shortage hits as input costs for MSMEs are already climbing rapidly. Over the past four months, steel prices have risen by 15% to 25%. Domestic prices for aluminum and copper have climbed by nearly 20%. Plastics, polymers, and chemicals have also seen about a 25% price increase. The Coimbatore District Small Industries Association (Codissia) noted that while global markets affect aluminum and copper prices, the nearly 20% domestic jump suggests traders may be artificially inflating prices. MSME profit margins typically range from 5% to 8%. Such substantial increases in raw material costs are unsustainable and damage competitiveness. Union Minister Jitan Ram Manjhi has acknowledged these concerns and pledged to work with finance, industry, and steel ministries to address raw material price issues. Codissia is calling for the removal of import duties on raw materials, a ban on steel exports, and the establishment of fixed maximum retail prices (MRPs) for essential inputs.
Government Pushes PNG Amid LPG Woes
The Indian government is actively encouraging a shift to Piped Natural Gas (PNG) as part of its energy security strategy. This is particularly relevant given geopolitical tensions in West Asia that affect LPG imports. New rules require businesses to switch to PNG where available, with a risk of LPG supply being cut off for those who don't comply. Oil marketing companies are rationing LPG, prioritizing household use, hospitals, and essential services. A committee is reviewing industrial requests based on urgency. Refiners have been instructed to boost LPG output for domestic use and sell only to state companies. This move towards PNG and greater domestic LPG production highlights the country's vulnerability to global energy supply disruptions. Interestingly, electric cooking is emerging as a potentially cheaper option, estimated to be 37% less expensive than non-subsidized LPG and 14% cheaper than PNG in FY2024-25, though initial adoption costs are a barrier.
MSMEs Seek Relief as Energy Landscape Shifts
Codissia has submitted detailed proposals to the central government. These include removing import duties on raw materials, banning steel exports to increase domestic supply, setting fixed MRPs for raw materials, and creating a monitoring committee to prevent hoarding. The Union Minister's promise of inter-ministerial talks suggests possible government action on raw material prices. While the accelerated rollout of PNG infrastructure is a longer-term plan, its immediate impact on easing the current LPG crunch for industrial users remains uncertain. For MSMEs, adapting to higher energy costs and exploring alternative technologies like electric cooking or renewable energy solutions could be key for long-term survival and competitiveness. Government initiatives promoting energy efficiency and greener practices within the MSME sector offer financial incentives, signaling a strategic shift towards sustainability. However, immediate relief from the current energy supply crisis is paramount for these businesses.