US share in India’s LPG imports surged to over 50% from under 10%

Why in the News

The share of the United States in India’s liquefied petroleum gas (LPG) imports has crossed 50 per cent in the six months since the West Asia conflict began, against less than 10 per cent in the preceding six months. The war began with United States and Israeli strikes on Iran in late February, and it halted vessel movement through the Strait of Hormuz. India’s import basket had been dominated by Gulf suppliers, so the loss of that route forced a substitution rather than a fall in demand. The tension is that a supply system built on a short haul from four Gulf sellers has been replaced inside six months by a long haul from a single seller. The concentration has moved rather than dissolved.

Why did a shipping chokepoint translate into an LPG shock?

1. The route’s function: The Strait of Hormuz is a narrow waterway connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea, and it is the primary evacuation route for energy supplies from the wider Gulf region.
2. Its global weight: The strait accounted for a fifth of world oil and liquefied natural gas (LNG) flows, so its closure was a global disruption before it was an Indian one.
3. India’s exposure through it: About 90 per cent of India’s LPG imports came from West Asia through the strait, against about 40 per cent of crude oil imports and 60 per cent of LNG imports.
4. Why LPG was hit hardest: Movement through the strait effectively covered around 54 per cent of India’s total LPG consumption, so one blocked route touched more than half the cooking fuel base.

How did India’s LPG import basket change in six months?

1. Overall volumes: India’s total LPG imports in the six months to August fell 43.1 per cent from the preceding six months, to 7.14 million tonnes.
2. United States: Supplies surged 281.1 per cent to 3.78 million tonnes for a 53 per cent share, against about 993,000 tonnes and a 7.9 per cent share in September to February.
3. United Arab Emirates: Volumes crashed 79.8 per cent to about 958,000 tonnes, and the share of the pre-war leading supplier fell to 13.4 per cent from 37.8 per cent.
4. Qatar: Volumes plummeted 84.7 per cent to about 405,000 tonnes, and the share shrank to 5.7 per cent from 21.1 per cent.
5. Kuwait: Volumes fell 81.7 per cent to about 346,300 tonnes, and the share contracted to 4.9 per cent from 15.1 per cent.
6. Saudi Arabia: Volumes fell 76.1 per cent to about 423,700 tonnes, and the share dropped to 5.9 per cent from 14.1 per cent.

Why did the United States become the fallback supplier?

1. Pre-existing scale: Washington was the largest LPG exporter worldwide before the crisis, so it was the only seller with spare volumes at the scale India needed.
2. Price position: United States propane was already cheaper than Asian supplies before the war, which made the switch commercially defensible and not only an emergency measure.
3. Availability over distance: With no nearby alternative, India accepted a higher delivered cost to bring cargoes from further away, because keeping cooking gas available was the operative priority.
4. The precedent it follows: The redirection mirrors the earlier flow of Russian crude barrels to India, where a disrupted market was replaced by whichever seller could load immediately.

What does the episode reveal about India’s energy import dependence?

1. The dependence baseline: India imports over 88 per cent of its oil, 60 per cent of its LPG and about 50 per cent of its natural gas, so a routing disruption anywhere becomes a domestic supply question.
2. Concentration is the real exposure: Four Gulf sellers on one waterway meant a single closure removed most of the basket at once, and no diversification existed to absorb it.
3. Substitution has a time cost: Rebuilding half the basket around one distant supplier took six months of scrambling, which is the lead time a chokepoint closure imposes on an importer.
4. The dependence is unresolved: American flows are expected to stay strong until West Asian supply normalises, and no clarity exists on when that will happen.

Challenges to India’s LPG supply security

1. The long haul carries a freight and transit penalty: A United States cargo takes far longer to reach an Indian port than a Gulf cargo, and the added voyage cost sits on every tonne landed. Eg. American propane bound for Asia moves through the Panama Canal, where transit slots were rationed during the drought-driven draft restrictions of 2023 and 2024.
   The Fix: Contract a share of American volumes on delivered terms with an alternative Cape of Good Hope routing priced into the contract.
2. Import and bottling infrastructure is concentrated on one coast: India’s very large gas carrier berths and bottling capacity sit largely on the western seaboard, built around short Gulf voyages and rapid turnarounds. Eg. The major LPG import terminals cluster at west coast ports such as Kandla, Mundra and Sikka.
   The Fix: Expand east coast import capacity and extend LPG pipeline evacuation on the model of the Paradip-Haldia-Durgapur line.
3. Administered retail prices push the shock onto the exchequer: Domestic cylinder prices are held stable, so a higher landed cost is absorbed by oil marketing companies or by the Budget rather than by the consumer. Eg. The targeted subsidy paid per cylinder under the Pradhan Mantri Ujjwala Yojana sits on top of a capped base price.
   The Fix: Move the subsidy fully to a direct transfer indexed to the import price, so the fiscal cost is visible and bounded rather than carried on company balance sheets.
4. India holds no strategic reserve for cooking gas: Emergency stocks exist for crude oil alone, so an LPG disruption has to be managed through spot buying at the worst available price. Eg. The Indian Strategic Petroleum Reserves caverns at Visakhapatnam, Mangaluru and Padur store crude oil and not LPG.
   The Fix: Build dedicated pressurised or refrigerated LPG storage at the major import terminals with a mandated minimum cover in days of consumption.
5. Substitution away from cylinders is only partial: Piped natural gas and electric cooking reach a limited share of households, so LPG demand cannot be shifted quickly when imports tighten. Eg. City gas distribution networks operate only in geographical areas awarded through bidding rounds by the Petroleum and Natural Gas Regulatory Board.
   The Fix: Accelerate piped connections inside already awarded city gas areas and tie household conversion targets to the licence conditions.

Conclusion

India has replaced a blocked route rather than reduced a dependence. The basket is now anchored on one distant seller in place of four near ones, and the switch was completed at speed because no stock cushion existed to buy time. The status is that American cargoes are expected to hold their share until West Asian supply normalises. The marker to watch is whether the Gulf share recovers once traffic through the Strait of Hormuz resumes, or whether contracts written during the disruption lock in a permanently longer supply line.

Matching Previous Year Question

“[2025, GS2, 15 marks] “Energy security constitutes the dominant kingpin of India’s foreign policy, and is linked with India’s overarching influence in Middle Eastern countries.” How would you integrate energy security with India’s foreign policy trajectories in the coming years?”