Under the new policy, bulk LPG supplies will be prioritised for a wide range of industries, including pharmaceuticals, food processing, agriculture, polymers, packaging, paints, steel, ceramics, glass, and aerosols
Pic/PTI
Amid escalating geopolitical tensions in the Middle East, the Indian government has introduced a revised LPG allocation formula aimed at ensuring uninterrupted supply to critical industries. The move, announced by the Ministry of Petroleum and Natural Gas, is intended to stabilise supply chains and protect sectors vital to the country’s economic resilience.
Focus on Critical Sectors to Maintain Supply Chains
Under the new policy, bulk LPG supplies will be prioritised for a wide range of industries, including pharmaceuticals, food processing, agriculture, polymers, packaging, paints, steel, ceramics, glass, and aerosols. These sectors are considered essential due to their direct impact on everyday consumption, healthcare, and industrial production.
Officials noted that ensuring fuel availability for these industries is crucial to prevent disruptions in manufacturing and distribution, particularly at a time when global uncertainties threaten energy supplies.
Allocation Capped, Supply Linked to Past Consumption
As per the revised formula, industries will receive up to 70 per cent of their LPG consumption levels recorded before March 2026. This benchmark-based allocation aims to maintain fairness while ensuring that essential operations continue without major interruptions.
However, the government has imposed an overall cap of 0.2 thousand metric tonnes per day for the entire industrial sector. This ceiling reflects the need to balance limited resources amid fluctuating global supply conditions.
Priority for Units Without Alternative Fuel Options
A key feature of the policy is the prioritisation of industries that cannot switch to alternative fuels such as piped natural gas (PNG). Factories where LPG is indispensable to the manufacturing process will receive supply preference to avoid production halts.
At the same time, industries capable of transitioning to PNG have been encouraged to do so. Units are required to register with oil marketing companies and apply for PNG connections through city gas distribution networks.
However, exemptions have been provided for industries where LPG remains a non-substitutable input, ensuring that operational efficiency is not compromised.
Incentives for States to Promote Gas-Based Alternatives
The Centre has already allocated 70 per cent of packaged non-domestic LPG to states and announced an additional 10 per cent allocation for those implementing reforms to promote PNG adoption.
State governments have been advised to take proactive measures, including disseminating the Natural Gas and Petroleum Products Distribution Order 2026, leveraging reform-linked allocation benefits, and expediting policies related to compressed biogas.
Surge in Demand for Smaller LPG Cylinders
The policy shift comes alongside a noticeable rise in demand for smaller LPG cylinders across the country. Since late March, approximately 7.8 lakh 5-kg free trade LPG cylinders have been sold, indicating increased reliance on LPG amid supply concerns.
Daily sales have also surged, crossing 1.06 lakh units on a single day earlier this week, compared to an average of around 77,000 per day in February. The trend highlights growing consumption pressures and the need for efficient allocation mechanisms.
Strategic Move Amid Global Uncertainty
The revised LPG allocation framework reflects the government’s effort to balance domestic industrial needs with evolving global energy dynamics. As tensions in key oil-producing regions continue to influence supply chains, such policy measures are expected to play a crucial role in maintaining economic stability and industrial continuity.
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