India significantly diversified its liquefied petroleum gas (LPG) import sources during the West Asia conflict, increasing purchases from the United States, Iran and several other countries to reduce dependence on the Gulf region, while state-owned oil marketing companies absorbed a large part of the rise in international prices to shield domestic consumers.
According to a Crisil report, nearly 90 per cent of India's LPG imports were sourced from West Asia before the conflict, making the country vulnerable to regional disruptions. By April 2026, however, the United States accounted for almost one-third of India's LPG imports, compared with just 8 per cent in February.
The shift was supported by a 2.2 million tonne-per-year LPG supply agreement signed with the US in late 2025, equivalent to around 10 per cent of India's annual import requirement. Iran also returned to India's import basket, contributing about 6 per cent of imports in April. Additional supplies were sourced from Argentina, Chile, France and the Netherlands.
While the diversification helped ensure uninterrupted supplies during the conflict, it also increased transportation distances and freight costs.
The disruption nevertheless affected consumption patterns. LPG demand declined to 2.47 million tonnes in April from 3.2 million tonnes in February as higher prices and supply concerns weighed on consumption.
After rising 6 per cent to a record 33.2 million tonnes in fiscal 2025-26, LPG consumption fell 13 per cent year-on-year in both March and April before declining 20 per cent in May.
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Commercial and industrial consumers were hit hardest, with demand falling more sharply than household consumption as market-linked users responded quickly to higher prices and tighter supply conditions.
The report noted that the Saudi Aramco Contract Price, the benchmark used for Indian LPG imports, rose 46 per cent between February and June due to supply concerns and elevated freight rates.
Despite the global surge, domestic household LPG prices remained relatively stable. The price of a 14.2-kg cooking gas cylinder in Delhi increased by about 10 per cent during the period, while commercial cylinder prices rose by more than 79 per cent.
The limited pass-through of higher costs to households resulted in substantial under-recoveries for oil marketing companies. Under-recoveries on domestic LPG cylinders in Delhi climbed to Rs 651 per cylinder in May, while cumulative losses borne by fuel retailers between March and May were estimated at nearly Rs 22,000 crore.
Crisil said easing tensions in West Asia could help moderate prices and ease supply concerns. However, the episode highlighted India's continued dependence on imported LPG and the need to maintain a diversified sourcing strategy to mitigate geopolitical and market risks.
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