When the Strait of Hormuz effectively closed in late February 2026, American coverage focused on oil prices and Wall Street volatility. In India, the story was more immediate: cooking gas — the fuel used by 330 million households— was suddenly in short supply. Many restaurants shut. The government invoked emergency laws. And a question started circulating — one that turned out to be more interesting than it first appeared:

Why LPG, but not gasoline or diesel?

Petrol and diesel are crude oil derivatives, produced domestically in India from crude refining — and India imports crude from 35–40 countries across multiple shipping routes, including a large and growing share from Russia that travels around the Cape of Good Hope with no Hormuz exposure at all. When one supply route goes down, others compensate. The crude oil supply chain has geographic diversity built in. It is also worth noting that petrol and diesel prices at Indian pumps did not simply hold steady on their own — the government reduced excise duties to absorb the crude price spike and shield consumers at the pump. That fiscal buffer was available for oil-derived transport fuels; no equivalent buffer existed for LPG.

LPG — liquefied petroleum gas — is a mixture of propane (C₃H₈) and butane (C₄H₁₀), stored as a liquid under moderate pressure. It is a derivative product produced either from crude oil refining or from natural gas processing. India produces only about 35–40% domestically, and imports the remaining 60–65% — roughly 18–20 million tonnes per year — with the vast majority coming from just four Gulf neighbors: UAE, Qatar, Saudi Arabia, and Kuwait, almost all of it transiting the Strait of Hormuz. When Hormuz closed, India’s LPG import flows dropped sharply and abruptly, with no comparable alternative supply available to step in at short notice.

Natural gas had partial insulation too. India’s LNG imports are 53% Hormuz-exposed — serious, but meaningfully lower, with the US, Australia, and Oman providing non-Hormuz supply, and existing terminal storage buying some time. LPG had none of those buffers. And India held only about 1.5 days of strategic LPG reserve when the crisis hit — separate from the operational commercial buffer that the supply chain normally carries.

Why is LPG India’s primary cooking fuel — and why is that so hard to change?

About 60% of Indian households cook primarily on LPG cylinders. That number reflects decades of deliberate government policy — the Ujjwala Yojana program extended subsidized cylinders to hundreds of millions of rural households as a clean cooking alternative to firewood and dung. It worked. LPG displaced solid fuel combustion at a scale that meaningfully improved public health across rural India.

But it created a single-fuel dependency that is now a strategic liability. And the obvious alternatives each run into specific, non-trivial barriers.

Piped natural gas (PNG) is the cleanest substitute — and the one India is now mandating for pipeline-covered households. The problem is that only about 5% of Indian households have a PNG connection today. Extending the pipeline network to the remaining 95% is a decade-long infrastructure program, not a crisis response.

Resistive electric cooking — the kind most common in the US — does not suit Indian cooking. The requirement for fast, intense, controllable flame across multiple burners simultaneously is not well-served by resistive elements, which heat slowly, cool slowly, and cannot replicate the wok-style flame control that Indian cooking depends on.

Induction cooking is more promising — it is faster, more efficient, and works well for commercial kitchens. Government has been actively pushing restaurants and hotels toward induction. But for residential households, two barriers remain: the appliance requires flat-bottomed cookware that many Indian kitchens do not use, and the electricity supply in large parts of rural and semi-urban India is too unreliable to be a primary cooking fuel. You cannot cook dinner on a grid that goes down for four hours a day.

The result is that there is no immediate, large-scale substitute for LPG in the Indian kitchen. Switching happens at the margin. The 300-plus million households on cylinders are, for now, essentially captive to whatever the LPG supply chain delivers.

If LPG comes from crude oil refining, why can’t India just make more of it?

This is the natural next question — and the answer reveals a fundamental constraint. Yes, LPG (propane and butane) is a byproduct of crude oil refining, just like petrol and diesel. But it is not a primary product. A typical crude oil refinery produces roughly 40–45% diesel, 20–25% petrol, 15% fuel oil — and only about 2–5% LPG. It is a residual of the refining process, not a targeted output.

India moved quickly when the crisis hit: refineries were ordered to redirect their propane and butane streams — which are normally burned as refinery fuel — into the LPG pool. That bought a meaningful boost, roughly 25–36% more domestic LPG output almost overnight, at essentially zero cost. It was the right call.

But it also hit a ceiling quickly. You cannot meaningfully increase LPG output from a refinery without processing more crude — and more crude means more of everything else too. The refinery is a fixed recipe. LPG is essentially the small fraction that falls out at the end. India has a refining capacity of approximately 256 million tonnes per year — among the largest in the world — and it still produces only about 12–14 million tonnes of LPG annually against national consumption exceeding 30 million tonnes (PPAC, 2024-25). The domestic production gap is structural, not fixable by operational tweaks alone.

What about producing LPG from natural gas processing?

This is where the answer gets more interesting — because natural gas processing is precisely where LPG can be a targeted product, not just a residual. When natural gas comes out of the ground, it often contains heavier hydrocarbon fractions — propane, butane, and other natural gas liquids (NGLs). Processing plants specifically strip these out, and the propane and butane become LPG. Unlike refinery LPG, this is a deliberate, engineered output.

The problem for India is twofold. First, India’s domestic natural gas production has been declining for years — the KG Basin deep-water fields collapsed from peak production in 2010 and are only partially recovering, and the Mumbai Offshore legacy fields of ONGC are declining at 5–7% per year. The domestic gas resource base that would feed NGL extraction plants is thin and shrinking.

Second, most of India’s gas now arrives as imported LNG — and the reality of how that gas is processed before export matters. Qatar strips propane and butane out at the liquefaction plant and sells them separately as LPG, which is precisely why it is one of the world’s largest LPG exporters. Australia and the US do the same: both countries extract and monetize natural gas liquids domestically before liquefaction, so the LNG that arrives at Indian terminals is predominantly lean — meaning mostly pure methane, with the heavier hydrocarbon fractions already removed — dry gas. The NGL value has already been captured at the source.

What if India bought “rich” LNG instead — and extracted the value here?

Australia and the US export lean LNG today because that is what their existing contracts specify and what their terminal infrastructure is configured to produce. But the underlying gas — before processing — is rich, meaning it still contains propane, butane, ethane, and other heavier hydrocarbons alongside the methane. Both countries produce abundant natural gas liquids from their shale and offshore fields. In principle, India could negotiate contracts for richer LNG and extract the NGL fractions at its own receiving terminals, as South Korea and Japan do. The economics and the energy security logic both point in that direction.

The value unlocked by processing rich LNG at the receiving terminal goes well beyond LPG. Propane and butane — the LPG components — are the most visible prize, but a rich LNG stream also contains ethane, the premier feedstock for petrochemical crackers. Ethane yields approximately 80% ethylene per unit processed — far higher than naphtha or propane — and ethylene is the building block for polyethylene plastics, packaging, and industrial chemicals. Reliance Industries already imports dedicated ethane from the US for its Jamnagar complex, which demonstrates the demand is there. Extracting ethane from rich LNG imports at scale would reduce India’s dependence on separately imported naphtha and LPG for its growing petrochemical industry, which the government is explicitly trying to expand.

There is also a pipeline safety argument that rarely gets mentioned. When domestic gas processing plants fail to fully strip propane and butane before injecting gas into the grid — which happens at several aging ONGC facilities — the heavier hydrocarbons raise the energy content of the gas stream beyond the calibration range of household appliances, industrial burners, and gas turbines. The result can range from burner damage and carbon monoxide risk to, in extreme cases, explosion. Building NGL extraction capability at LNG import terminals, and enforcing it at domestic processing plants, addresses this safety risk directly: lean, specification-quality methane enters the grid, and the valuable heavier fractions are captured separately rather than blended in and lost.

This also means NGL extraction does not compete with India’s PNG expansion drive — it is a prerequisite for it. Piped natural gas can only be safely distributed to homes and businesses if the gas meets tight specifications for calorific value and composition. Propane and butane must be removed before the methane enters the pipeline grid, whether that gas comes from domestic processing plants or from imported LNG terminals. The choice is not between extracting NGLs and expanding PNG — it is between extracting NGLs properly and capturing their value as LPG, ethane, and petrochemical feedstock, or letting them contaminate the pipeline stream and create safety hazards while the value is wasted. Every household connected to the PNG network India is working to expand is a household that needs specification-quality methane at the burner tip. NGL extraction is how you get there. India’s PNG ambition and its NGL extraction opportunity are the same infrastructure investment, not rival ones.

The obstacles are real, however. Australia and the US have existing long-term contracts and terminal configurations optimized for lean LNG export — negotiating rich LNG supply requires either new dedicated contract structures or modifications to export terminal processing, neither of which happens quickly. Global supply of rich LNG is genuinely limited; most major exporters have already committed their NGL streams domestically. India’s receiving terminals at Dahej and Ennore would need NGL extraction units built or retrofitted — an estimated $238–357 million and 3–4 years of construction, before a single tonne of LPG or ethane is recovered. And the entire value chain — extraction columns, fractionation units, storage, and downstream offtake agreements for ethane and LPG — needs to be designed and contracted as an integrated system, not assembled piecemeal. South Korea and Japan built these capabilities deliberately over decades, starting from the design of their first import terminals. India would be retrofitting infrastructure that was never intended to do this work. That is harder, more expensive, and slower — but given the LPG import bill, the petrochemical growth ambitions, and the helium exposure the 2026 crisis revealed, the case for starting now is considerably stronger than it was two years ago.

What about diversifying LPG imports from other countries?

The most direct response to Hormuz concentration is simply buying LPG from countries that do not route through it. India has already moved in this direction — signing a 2.2 million tonne per year contract with US suppliers and exploring Australian spot volumes. But the options are more limited than they appear, for reasons specific to LPG logistics.

Australia is the most strategically attractive non-Hormuz source. Cargoes from Australia’s NW Shelf reach India’s east coast in approximately 9 days via the Indian Ocean — comparable to Qatar at 5–6 days, and with no chokepoint exposure whatsoever. The problem is volume: most Australian NGL production is already committed under long-term contracts to Japanese and Korean buyers. Available spot volume is limited, and expanding Australia’s share significantly requires new dedicated supply agreements that will take years to negotiate and commission.

Russia’s Sakhalin-2 project, on Sakhalin Island in the Russian Far East, produces and exports propane and butane via the Pacific Ocean — reaching India’s east coast in approximately 10–12 days with no chokepoint exposure at all. India has received spot cargoes. The constraint is sanctions risk: Indian companies with exposure to US dollar clearing and international capital markets need to assess carefully. Under a long-term arrangement insulated from sanctions risk, Sakhalin could supply 0.5–1.0 million tonnes per year, but this requires navigating a complicated geopolitical environment.

The US contracted volumes are real and growing, but face two structural challenges. First, Very Large Gas Carriers (VLGCs) — the specialist tankers that carry LPG — are in tight global supply, with a global fleet of only around 375 vessels. The round-trip from the US Gulf Coast to India is approximately 65–70 days via the Cape of Good Hope (the Suez Canal route has been largely suspended since Houthi attacks on Red Sea shipping began in 2024). This long round-trip ties up ships for months, significantly reducing the effective fleet available for India. Second, US LPG is propane-rich — roughly 80–90% propane from US export terminals. India’s household LPG is typically a propane-butane blend weighted toward butane (roughly 40–60% butane), which suits the subcontinental climate and existing cylinder specifications. Using US propane directly means either blending it with butane sourced elsewhere, adjusting appliances, or accepting a different-than-standard mixture. This is manageable, but it adds operational complexity.

Canada — via the LNG Canada terminal at Kitimat, British Columbia — is an emerging Pacific-route option, and propane extracted from Canadian LNG could eventually supplement supply. Brazil and Oman (which exports LPG through the Gulf of Oman, naturally bypassing Hormuz) offer smaller but meaningful volumes. The honest conclusion is that non-Hormuz LPG supply is genuinely constrained by fleet availability, cargo composition, and long-term contract structures — which is precisely why the domestic options (NGL extraction, DME blending, bio-LPG) deserve at least as much attention as import diversification.

What about DME — as China does — and bio-LPG — as Europe does?

Beyond rich LNG extraction, two domestic pathways deserve attention — and both have the advantage of being established industrial practice elsewhere, not experimental ideas.

Dimethyl Ether (DME) from coal gasification is China’s answer to LPG supply pressure — and China runs it at enormous scale. China produces approximately 10–12 million tonnes of DME per year, primarily from the coal → syngas → methanol → DME route, and Chinese households in coal-rich northern provinces have used DME-LPG blends routinely for years. It is not pilot technology; it is industrial-scale practice in a comparable economy next door. India has abundant domestic coal and the same pathway available. Gasifying coal produces syngas, which converts to methanol and then DME — a gas that blends up to 20% into standard LPG cylinders without any changes to existing appliances or distribution infrastructure. An 8% national DME blend would displace approximately 2.5 million tonnes of Gulf LPG imports annually, sourced entirely from Indian coal and completely Hormuz-immune. The Bureau of Indian Standards has already notified the blending standard. The missing piece is commercial-scale DME production capacity, which projects like New Era Cleantech Solutions’ Rs 20,000 crore (~$2.4 billion) facility in Maharashtra are beginning to address.

Bio-LPG is Europe’s established answer — particularly in Scandinavia and the Netherlands, where propane recovered from Hydrotreated Vegetable Oil (HVO) and biodiesel production has supplied domestic LPG markets for years. The principle is straightforward: when vegetable oils or waste cooking oil are processed into renewable diesel or sustainable aviation fuel, propane is produced as a chemical co-product. Capture it, liquefy it, and it is chemically identical to fossil LPG. India is scaling up HVO production for its own aviation fuel mandates — and currently the propane co-product is mostly flared or burned as refinery fuel rather than captured. Mandating that HVO producers supply this propane stream into the national LPG pool would cost almost nothing and yield 0.1–0.3 million tonnes per year of fully domestic, non-Hormuz LPG. The longer-horizon version — biomass gasification of India’s 500–600 million tonnes of agricultural residue burned in fields annually — could yield far more, though commercial-scale plants have yet to be sanctioned.

The subsidy paradox — a negative tariff on imports

India is frequently described as one of the world’s most tariff-heavy economies — a country that has historically protected domestic industry behind high import duties across sectors from electronics to automobiles to agricultural goods. The instinct to tax imports and shield domestic producers runs deep in Indian economic policy.

Which makes the LPG subsidy one of the more remarkable contradictions in Indian economic history. By keeping the subsidized cylinder price well below the true market cost of imported LPG, the government is in effect doing the opposite of a tariff: it is making imported LPG artificially cheap for the consumer. Rather than taxing the import to encourage domestic alternatives, it is subsidizing the import to suppress the price signal that would otherwise drive households toward PNG, induction cooking, or other options. It is, in the most literal sense, a negative tariff on imports.

The fiscal scale of this is worth understanding clearly. The direct subsidy paid to LPG consumers — cash transfers under the PMUY and PAHAL schemes — amounted to approximately Rs 15,479 crore (~$1.84 billion) in FY2024-25. But the full import bill for LPG was approximately Rs 1,06,000 crore (~$12.6 billion) in the same year, representing 53% of India’s entire petroleum product import expenditure. Ten years of direct subsidy payments alone (~$18 billion) exceed the entire estimated cost of the strategic reserve building program across LPG, LNG, and crude oil. The country is spending more subsidizing an import dependency than it would cost to structurally reduce it.

A country known for protecting domestic industry with high tariffs is running a negative tariff on one of its most strategically exposed imports — subsidizing the very dependency the crisis exposed.

The subsidy also actively works against the alternatives. Induction cooking at urban electricity prices costs roughly 40–55% less than even subsidized LPG per unit of useful cooking energy. Piped natural gas is similarly cheaper at the margin. But the subsidy narrows that gap enough that most households have no compelling price reason to switch — particularly given the upfront cost of new appliances or PNG connection fees. A gradual, pre-announced reduction in the subsidy — paired with targeted support for below-poverty-line households to adopt induction cooktops or PNG connections — would let the price signal do the work that emergency orders cannot.

Options to reduce LPG dependence on Hormuz imports

The table below summarizes the key pathways to reduce India’s 92% Hormuz exposure for LPG, drawn from the detailed analysis in a recent report (preprint link). Options span supply diversification, domestic production, demand reduction, and storage — each with different timelines, costs, and secondary risks. These require evaluation for prioritization against the following criteria: speed of impact, volume of impact, cost to consumer, cost to government, Hormuz independence, political feasibility, rural applicability, long-term transformation potential, and infrastructure requirements.

 

The bigger picture

The LPG crisis is the most visible symptom of a broader pattern — but the solutions are not as straightforward as they first appear. Each fix introduces its own new vulnerability. India is not choosing between dependency and independence. It is choosing which dependencies to carry.

The most immediate response to the LPG crisis — shifting households to piped natural gas and negotiating rich LNG contracts to extract LPG at the terminal — reduces Hormuz exposure from 92% to 53%. That is real progress. But it deepens India’s dependence on LNG imports, which carry their own supply chain risks: long-term contracts with Gulf producers, terminal infrastructure that takes years to build or retrofit, and a global LNG market that can tighten sharply when multiple buyers compete for the same cargoes. Solving the LPG crisis by doubling down on LNG is a meaningful improvement — but does not eliminate import risks.

The longer-term response — electrifying cooking and transportation — reduces both LPG and crude oil exposure simultaneously. But electrification introduces a different set of import dependencies that are rarely discussed in the same breath. Solar panels, which India is deploying at enormous scale, rely on a supply chain approximately 90% controlled by Chinese manufacturers. Electric vehicles depend on rare earth elements — neodymium, dysprosium, and others — for their permanent magnet motors, with China controlling roughly 85–90% of global rare earth processing. Battery cells require lithium, cobalt, and nickel, with cobalt concentrated in the Democratic Republic of Congo and processing again dominated by China. India is working to build domestic manufacturing capacity under its Production Linked Incentive scheme — but meaningful supply chain independence is years away. And underlying all of it is a grid reliability problem: induction cooking and EV charging require electricity that is available when you need it. In large parts of rural and semi-urban India, that is still not guaranteed.

Coal gasification — producing DME to blend with LPG, synthetic natural gas for city grids, and ammonia for fertilizers from domestic coal — is the most Hormuz-immune pathway available to India in the medium term. Indian coal is abundant and domestically controlled. But it comes with two uncomfortable tradeoffs. First, India still imports roughly 18–20% of its thermal coal, with Indonesia supplying approximately 60% of those imports; a repeat of Indonesia’s January 2022 export ban would directly constrain the gasification program meant to replace Gulf LPG. Second, coal gasification at scale produces significant carbon emissions. Unless paired with Carbon Capture, Utilization and Storage (CCUS) — which India has yet to develop at commercial scale or establish in policy — the coal pathway trades one geopolitical vulnerability for an environmental one. Shifting from coal to natural gas for cleaner electricity deepens the import vulnerabilities discussed above.

Expanding hydroelectric power — including pumped hydro storage to balance the intermittency of solar and wind — would reduce India’s dependence on coal for baseload generation. But India’s best remaining hydro sites are in ecologically sensitive terrain, often involving displacement of tribal communities with unresolved land and forest rights. Several Himalayan hydro projects have been tied up in legal challenges for years. Interstate river disputes — between states sharing the Krishna, Cauvery, or Brahmaputra river systems — add political complexity that no engineering solution resolves. And the 2021 Chamoli disaster in Uttarakhand, where a glacial flood destroyed two hydropower projects, was a reminder that climate change is simultaneously increasing the urgency for hydro storage and increasing the physical risks at the sites where it would be built.

Nuclear power is the cleanest and most energy-dense long-term baseload option, and India has genuine strategic assets: the world’s third-largest thorium reserves and an ambitious three-stage program designed to eventually run on them. But the near-term reality is harder. India’s 2010 nuclear liability law — which allows operators to sue equipment suppliers in the event of an accident — has effectively frozen out Western nuclear technology providers for fifteen years. The Jaitapur plant, proposed in 2008, has not broken ground. Domestic uranium reserves are limited. The Prototype Fast Breeder Reactor at Kalpakkam, meant to be the gateway to the thorium cycle, has been described as “almost ready” for over a decade. Meanwhile, public concern about nuclear safety — while statistically disproportionate relative to the documented mortality of coal — is a real political constraint. The path from India’s current 7.5 GW of nuclear capacity to the government’s target of 100 GW by 2047 would require an 8–10 times acceleration in the current build rate. That is not impossible, but it requires reforms — to the liability law, to the monopoly structure of nuclear construction, to the regulatory framework — that have been deferred for years.

The honest picture, then, is not a clean transition from vulnerable to secure. It is a managed cascade: LPG exposure reduced by shifting toward LNG, LNG exposure reduced by coal gasification and domestic gas, coal gasification emissions constrained by CCUS, grid reliability improved by hydro and nuclear, each step replacing one set of risks with another that is somewhat more manageable. Progress is real — but the idea that any single pathway resolves India’s energy vulnerability without creating new ones is a comforting fiction.

The LPG crisis was not caused by one failure. It was caused by a decade of deferred decisions — on reserves, on infrastructure, on supply diversification, on rich LNG contracts and NGL extraction, on DME, on subsidy reform. The Hormuz closure did not create the vulnerability. It just made it impossible to ignore.

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Suresh B Reddy, Ph.D. is an independent consultant specializing in energy, electrification, and control systems. He served as Chief Engineer (Electrification) for Caterpillar Inc., and Head of R&D (Solar Energy) for Fronius USA, and brings decades of research and product development experience spanning oil and gas, marine, electric power, renewables, mining, transportation, and plastics manufacturing, drawn primarily from careers at Caterpillar Inc. and General Electric Company. He can be reached at suresh.reddy@alum.mit.edu (personal website: sureshbreddy.com).

This article is excerpted from the author’s recent report (preprint link), “India’s Energy Security and the Strait of Hormuz Crisis”, which covers natural gas, crude oil, coal, fertilizers, aviation fuel, helium, and electrification in detail.