Background
The recent disruption of shipping through the Strait of Hormuz has exposed India’s heavy reliance on imported liquefied petroleum gas (LPG). In response, the Union government invoked the Essential Commodities Act as an emergency measure.
Key Developments
- On 5 March 2024, the government ordered all oil refineries to divert their propane and butane streams exclusively to LPG production.
- A revised order on 9 March 2024 extended the directive to SEZ refineries and petrochemical complexes, mandating use of C3 and C4 streams (propylene, butene, etc.) for LPG only.
- All LPG cylinders are to be supplied only by IOCL, BPCL and HPCL for domestic households, sidelining commercial kitchens.
- A parallel natural‑gas allocation order prioritises household piped gas, CNG for transport, LPG‑feedstock gas and compressor fuel, capping supplies to fertilizer, tea and other industries.
Important Facts
- India’s LPG consumption in FY 2024‑25 is 31.3 million tonnes, while domestic refinery output is only 12.8 million tonnes (≈41%).
- About 90% of LPG imports arrive via the Strait of Hormuz, making the supply chain vulnerable.
- Domestic production of LPG has risen by at least 25% after the order, yet a 50% import gap remains.
- India’s total natural‑gas consumption is 189 million standard cubic meters per day; only 52% is produced domestically, with a quarter imported from the Persian Gulf.
- Under the gas allocation order, fertilizer manufacturers receive 70% of their usual requirement, while industrial sectors are capped at 80%.
Exam Relevance
The episode illustrates several core UPSC themes:
- Application of the Essential Commodities Act as a tool for crisis management and price stability.
- Strategic importance of energy security, especially for cooking fuel, in the context of geopolitical tensions (GS3).
- Role of flagship schemes like the Pradhan Mantri Ujjwala Yojana in shaping domestic demand.
- Inter‑agency coordination between ministries (Petroleum, Commerce, and Energy) and public sector undertakings (IOCL, BPCL, HPCL, ONGC, GAIL, Reliance) in implementing policy directives.
Way Forward
While the emergency order offers short‑term relief, long‑term strategies are essential:
- Expand strategic LPG and LNG reserves to cushion future supply shocks.
- Accelerate domestic upstream projects and downstream capacity to reduce import dependence.
- Diversify import sources beyond the Persian Gulf and explore floating LNG terminals.
- Strengthen the regulatory framework for equitable allocation during crises, ensuring minimal disruption to critical sectors like agriculture and transport.
These measures align with India’s broader goal of achieving energy self‑reliance and safeguarding vulnerable consumers against geopolitical volatility.