India significantly diversified its liquefied petroleum gas (LPG) import sources during the recent West Asia conflict, ramping up purchases from the United States, Iran, and several other nations to cushion the blow from disruptions to Gulf supplies, which traditionally account for nearly 90 per cent of the country's LPG imports. The shift, documented in a report by Crisil, came at a steep cost — state-owned oil marketing companies (OMCs) absorbed cumulative losses of nearly ₹22,000 crore between March and May 2026.

How India's Import Profile Changed

By April 2026, the United States had emerged as India's single largest LPG supplier, contributing nearly one-third of total imports — up sharply from just 8 per cent in February. This pivot was underpinned by a 2.2 million tonne per annum LPG supply agreement signed between India and the United States in late 2025, covering approximately 10 per cent of India's annual import requirement.

Iran also re-entered India's import basket, accounting for nearly 6 per cent of LPG imports in April. Beyond these two countries, India sourced LPG cargoes from Argentina, Chile, France, and the Netherlands — a notably wider geographic spread than the country's pre-conflict sourcing pattern. While this diversification strategy preserved supply security, it also meant longer shipping routes and elevated freight costs.

Demand Takes a Hit

The supply disruptions and higher prices took a measurable toll on domestic consumption. India's LPG consumption fell to 2.47 million tonnes in April from 3.2 million tonnes in February. After hitting a record 33.2 million tonnes in FY26 — annual growth of 6 per cent — demand dropped 13 per cent year-on-year in both March and April, followed by a steeper 20 per cent decline in May.

Commercial and industrial consumers bore the sharpest impact, as they face market-linked pricing and adjusted consumption more quickly in response to rising costs. Household demand proved comparatively resilient, supported by only modest increases in retail cooking gas prices.

Global Prices Surge, Domestic Prices Lag

According to the Crisil report, the conflict triggered a 46 per cent rise in the Saudi Aramco Contract Price — the benchmark used for Indian LPG imports — between February and June, driven by supply disruption fears and higher freight costs. Domestic prices, however, did not move in lockstep.

The price of a 14.2-kg domestic LPG cylinder in New Delhi rose approximately 10 per cent during the period, while the 19-kg commercial cylinder surged more than 79 per cent. The gap between procurement costs and subsidised retail prices widened sharply, creating a significant under-recovery burden for OMCs.

The Under-Recovery Burden on OMCs

Crisil estimated that under-recoveries on domestic LPG cylinders in Delhi reached ₹651 per cylinder in May. Cumulative losses borne by state-owned fuel retailers over the March–May 2026 period stood at nearly ₹22,000 crore. This comes amid an already familiar pattern — Indian OMCs have historically absorbed LPG losses during periods of global price spikes to shield household consumers from the full impact, a practice that periodically strains their balance sheets and raises questions about long-term pricing policy.

With global LPG prices still elevated and the geopolitical situation in West Asia fluid, the scale and duration of further OMC losses will depend on whether international benchmarks ease and how quickly Gulf supply routes normalise.