Government Directs Refiners to Prioritise Propane and Butane for Domestic LPG Production
The Ministry of Petroleum and Natural Gas issued a directive on March 5, 2026, compelling all oil refiners to maximise production of propane and butane streams exclusively for LPG manufacturing.
Refiners have been explicitly barred from diverting, processing, cracking, or converting propane and butane streams for petrochemical products or downstream derivatives.
The three state-owned Oil Marketing Companies — Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation — have been directed to ensure LPG produced reaches strictly domestic consumers, prioritising household use.
The directive was issued under Section 3 of the Essential Commodities Act, 1955, and the Petroleum Products (Maintenance of Production, Storage and Supply) Order, 1999.
The decision followed a high-level meeting chaired by Union Minister Hardeep Singh Puri amid rising energy uncertainties linked to the West Asia conflict.
Essential Commodities Act, 1955
The Essential Commodities Act (ECA), 1955 empowers the Central Government to control the production, supply, and distribution of commodities deemed essential for maintaining public welfare. Under Section 3, the government can regulate trade, fix prices, impose stock limits, and issue binding directions to producers and distributors of listed commodities, including petroleum products.
The government invoked the ECA's Section 3 powers to issue a legally binding order to refiners, demonstrating how this 1955 law remains a powerful instrument for managing energy supply crises even in 2026.
India's LPG Import Dependence and Energy Security
India is the world's second-largest LPG importer, with domestic production meeting only about 41% of demand. Approximately 83% of India's LPG imports transit the Strait of Hormuz, creating acute vulnerability to geopolitical disruptions in the Persian Gulf region. In February 2026, LPG demand reached 2.8 million tonnes — a 10% year-on-year increase and the highest-ever daily consumption rate.
The directive to maximise domestic LPG production is a direct response to India's extreme import dependence for LPG and the immediate threat posed by Strait of Hormuz disruptions, with the government essentially attempting to expand the domestic supply buffer.
Pradhan Mantri Ujjwala Yojana (PMUY)
Launched in May 2016, PMUY aims to provide clean cooking fuel (LPG) to women from Below Poverty Line (BPL) households, replacing traditional biomass-based cooking. The scheme has fundamentally transformed India's household energy landscape, making LPG a near-universal cooking fuel and consequently making its uninterrupted supply a critical governance challenge.
The massive expansion of domestic LPG connections through Ujjwala Yojana means that any disruption in LPG supply now affects over 330 million households, making the government's directive to prioritise domestic production a matter of direct welfare concern for hundreds of millions of citizens.
- India produces only ~41% of its LPG requirement domestically; the rest is imported
- ~83% of LPG imports transit the Strait of Hormuz
- February 2026 LPG demand: 2.8 million tonnes (highest-ever daily consumption)
- Active domestic LPG connections: ~332.1 million; PMUY connections: ~104.29 million
- LPG storage capacity: ~1.2 million tonnes (~15 days of demand)
- US LPG supply contract: 2.2 million tonnes annually
- Domestic LPG production reportedly increased 40% following the directive
- Directive issued under Essential Commodities Act, 1955 (Section 3)