The lack of liquefied petroleum gas (LPG) cylinders is affecting households, restaurants, and small businesses throughout India, as evidenced by reports from Bengaluru, Coimbatore, and Hyderabad. Commercial establishments are having a difficult time obtaining cooking gas, resulting in menu reductions and shortened business hours. The supply shortage is indicative of the impact global energy supply disruptions have had on India’s fuel supply chain.
The imports of Liquefied Petroleum Gas (LPG) comprise a significant percentage of the total volume of fuel imported into India. LPG is by far the most commonly used fuel for cooking in India. In fact, more than 31 million tonnes of LPG were consumed domestically in 2013, with approximately 87 per cent of that amount consumed by households, as their primary energy source for cooking.
Over the past ten years, the increase in demand for LPG across India has been steep, as a result of the government of India’s Pradhan Mantri Ujjwala Yojana program, which has introduced LPG as a cooking fuel to rural populations that had historically used biofuels (primarily wood).
India’s vulnerability as it relates to its LPG supply chain is demonstrated clearly by its extremely high dependence on imports. By 2020, an estimated 60% of India’s total LPG demand will be met by imported supplies from foreign countries (primarily Saudi Arabia and Qatar).
Hormuz disruption hits LPG shipments
In addition, tensions in West Asia have disrupted the transportation of LPG through the Strait of Hormuz. As approximately 85-90% of India’s total imported LPG supplies move through this narrow shipping lane that connects the Persian Gulf with the wider international marketplace, this is especially troubling for India.
Due to restrictions on the movement of tankers and many vessels currently unable to fly flags or even dock in the Gulf, shipments of LPG destined for India have slowed to a practical standstill. Reports indicate that more than 20 vessels flying Indian flags are currently stranded in the Gulf and do not know when they will be able to resume shipping.
To limit any potential interruption to household cooking fuel deliveries, the Indian government has told oil firms to focus on distributing LPG to households first; however, by making this decision, the government has created an enormous shortage of LPG for commercial users.
Commercial users face the biggest impact
Given that the majority of hotels, restaurants, tea shops and hostels utilize commercial LPG cylinders daily for their cooking needs, many businesses say they have received very few cylinders compared to what they usually receive.
Industry leaders from the Federation of Hotel and Restaurant Associations of India have issued a warning that restaurants may shut down temporarily if the supply chain doesn’t improve.
Many restaurants are already eliminating menu items and cutting back on cooking hours to lessen fuel consumption. Small tea shops and street vendors are extremely susceptible to the LPG shortage; they operate with one or two cylinders at a time.
Government steps to stabilize supply
To address shortages and manage the distribution of essential goods, the Government of India has invoked provisions of the Essential Commodities Act.
Oil refineries have been instructed to increase their LPG production by diverting propane and butane that would normally be used for making petrochemicals into cooking gas production.
Major oil marketing companies, including Indian Oil Corporation and Bharat Petroleum, are now required to prioritise the delivery of cooking gas to households, hospitals, and student hostels.
Additionally, the Government has extended the LPG refill booking period from 21 days to 25 days to reduce the likelihood of consumers hoarding fuel.
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Rising prices add pressure
Supply disruptions are already having an effect on prices.
The price of domestic LPG cylinders has increased by about ₹60, while the price of commercial cylinders used in restaurants has increased by approximately ₹114.
For many households and small businesses, even a small increase in the price of cooking fuel can create severe strain on their budgets.
According to authorities, India has adequate fuel reserves to cope with expected demand within a short period of time. Still, if West Asian tensions continue and shipping through the Strait of Hormuz does not stabilise, demand for LPG supplies will increase across India as other countries compete for reduced volumes.
The government’s supply strategy continues to protect household LPG needs while minimising shortages in commercial LPG supply until normal energy supply routes can be established.
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