NEW DELHI : India’s aggressive efforts to safeguard cooking gas supplies during disruptions in the Persian Gulf have now resulted in an unexpected challenge: excess liquefied petroleum gas (LPG) inventories that are outpacing domestic demand. State-owned fuel retailers had significantly increased imports during the peak of the supply uncertainty, fearing prolonged disruptions in shipments through the Strait of Hormuz.
However, with cargoes now reaching Indian ports and consumption remaining subdued, government-run refiners are dealing with more LPG than the market currently requires.
According to a Bloomberg report citing people familiar with the matter, the three government-owned refiners, including Indian Oil Corp., had arranged LPG imports of as much as 40,000 tonnes a day during the supply crisis. Current daily import requirements, however, have eased to around 30,000-32,000 tonnes.
The oversupply has been driven by both increased domestic production and slower-than-expected recovery in demand. During the period when shipments through the Strait of Hormuz were severely affected, state refiners sharply increased LPG production by more than two-thirds, reaching nearly 54,000 tonnes per day.
Production has since been scaled back to approximately 40,000 tonnes daily, the report added.
Industrial Demand Yet To Return To Earlier Levels
While supply conditions have improved, consumption has not recovered at the same pace.
Large commercial consumers, including restaurants and industries such as ceramic-tile manufacturers, shifted to alternative energy sources like piped natural gas during the supply disruption. Many of these users have yet to fully return to LPG.
Oil ministry data showed that LPG consumption in June averaged around 73,000 tonnes per day, critically below the 91,000-tonne daily average recorded during the financial year that ended in March.
The mismatch between supply and demand has left refiners with growing inventories, creating storage challenges.
Cargoes Arrive As Regional Supply Routes Reopen
During the height of the geopolitical tensions, refiners deliberately purchased more LPG cargoes than required because of concerns that some shipments might never arrive.
However, an interim peace agreement between the US and Iran allowed shipping activity through the Strait of Hormuz to resume for several weeks, enabling delayed cargoes to eventually reach India. Although disruptions have resurfaced, their impact has not yet been reflected in Indian supplies.
The report said that at least one state-owned refiner was forced to pay penalty charges to a shipowner after unloading of an LPG cargo was delayed because storage tanks had reached capacity.
India sources more than 90 per cent of its LPG imports from the Middle East. During the recent conflict involving Iran, the country experienced severe supply constraints, prompting authorities to implement emergency measures. These included accelerating the rollout of natural gas pipelines and encouraging the temporary use of alternative fuels such as biomass and kerosene to bridge the supply gap.
