Govt sets LPG production targets for refiners; Reliance gets largest quota
The Ministry of Petroleum and Natural Gas issued an order (August 13, 2026) fixing maximum LPG production targets for 21 refineries and upstream companies for the first time, with a combined target of 63,810 tonnes per day.
Reliance Industries' Jamnagar (domestic tariff area) refinery received the single largest allocation at 18,000 tonnes per day; 18 public-sector refineries together must produce 31,470 tonnes daily; Nayara Energy's Vadinar refinery was assigned 4,480 tonnes per day; upstream producers including ONGC and GAIL must generate 6,460 tonnes daily from natural gas processing.
The move follows supply vulnerabilities exposed when a West Asia conflict disrupted LPG import routes through the Strait of Hormuz, at a time when India imports a majority of its LPG requirement.
The framework directs refiners to pursue technically and economically viable upgrades (such as naphtha-to-LPG conversion and fluid catalytic cracking unit modifications), will be reviewed every six months, and reserves government authority to mandate higher output during future supply emergencies.
LPG Subsidy Architecture: PMUY and DBTL/PAHAL
India's LPG market combines market-determined refinery pricing with a targeted subsidy for vulnerable households, delivered through Direct Benefit Transfer (DBT), alongside a broader universal-access push under the Pradhan Mantri Ujjwala Yojana (PMUY).
Key Details
- PMUY was launched on 1 May 2016 (Ballia, Uttar Pradesh) by the Ministry of Petroleum and Natural Gas to provide free LPG connections to Below Poverty Line (BPL) households, with an initial target of 5 crore connections and ₹8,000 crore allocated.
- LPG subsidy is delivered through Direct Benefit Transfer for LPG (DBTL, popularly "PAHAL"), crediting subsidy directly to consumers' bank accounts rather than through subsidised retail prices.
- Oil marketing companies (OMCs) bear "under-recoveries" on domestic LPG cylinders sold below cost, which the government periodically compensates.
Mandating higher domestic production is aimed at reducing India's exposure to costly, import-dependent LPG supply, which in turn affects the fiscal burden of subsidy and under-recovery compensation borne by the government and OMCs.
Strategic Petroleum Reserves and India's Energy-Security Architecture
India maintains underground strategic crude oil reserves managed by Indian Strategic Petroleum Reserves Limited (ISPRL), built after past Gulf-related supply shocks underscored import vulnerability — though these reserves cover crude oil, not LPG specifically, leaving a gap that production mandates like this one are intended to address.
Key Details
- ISPRL, a subsidiary of the Oil Industry Development Board under the Ministry of Petroleum and Natural Gas, operates underground rock-cavern storage at Visakhapatnam (1.33 MMT), Mangaluru (1.5 MMT) and Padur (2.5 MMT) — a combined capacity of about 5.33 MMT of crude oil.
- These reserves are distinct from and additional to the working stocks refiners and oil companies already hold.
- No comparable dedicated strategic reserve currently exists for LPG, making production-side mandates (rather than reserve stockpiling) the primary lever available for LPG-specific supply security.
Because India lacks LPG-specific strategic reserves comparable to its crude oil caverns, the government's response to import vulnerability has instead taken the form of mandatory production targets at existing refineries — a structurally different energy-security tool applied to a fuel without its own reserve infrastructure.
The Strait of Hormuz as a Strategic Chokepoint
The Strait of Hormuz, the narrow waterway between Iran and Oman connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea, is one of the world's most important energy-trade chokepoints, through which a large share of India's crude oil and LPG imports transit.
Key Details
- The strait links Gulf oil and LPG producers to open-ocean shipping routes; a significant share of global seaborne oil and LPG trade passes through it.
- India sources a majority of its crude oil and LPG imports from Gulf countries, making disruption of this route a direct supply-security risk.
- During the 2026 West Asia conflict, disruption to Hormuz-routed trade prompted emergency government orders that temporarily pushed India's domestic LPG output to around 55,000 tonnes per day.
The new production-target order formalises and expands the emergency capacity that refiners demonstrated during the Hormuz-linked disruption, converting a temporary crisis response into a standing policy framework.
Domestic Natural Gas Pricing (APM) and Upstream LPG Output
A portion of India's LPG is produced by upstream companies (ONGC, GAIL) as a byproduct of processing domestically produced natural gas, whose price is governed by the Administered Pricing Mechanism (APM) framework, most recently revised following the Kirit Parikh Committee's 2022 recommendations.
Key Details
- The Rangarajan Committee (2013) formula for domestic natural gas pricing was implemented from November 2014, linking domestic gas prices to international benchmarks.
- The Kirit Parikh Committee (2022) recommended a ceiling-price band and a market-linked pricing glide path for APM gas, adopted by the government from April 2023.
- Upstream companies' LPG output from gas processing is directly influenced by the economics set by this domestic gas-pricing formula.
The order's 6,460 tonnes-per-day target for upstream producers (ONGC, GAIL) draws on gas-processing capacity whose cost-competitiveness is shaped by the prevailing APM gas-pricing formula, linking this production mandate to a broader domestic gas-pricing policy debate.
- Order issued: August 13, 2026, by the Ministry of Petroleum and Natural Gas; covers 21 refineries and upstream companies.
- Combined production target: 63,810 tonnes per day.
- Reliance Industries (Jamnagar, domestic tariff area): 18,000 tonnes/day — the largest single allocation.
- 18 public-sector refineries: 31,470 tonnes/day combined.
- Nayara Energy (Vadinar): 4,480 tonnes/day.
- Upstream producers (ONGC, GAIL): 6,460 tonnes/day from natural gas processing.
- During the West Asia conflict-driven crisis, emergency orders had pushed domestic LPG output to about 55,000 tonnes/day.
- PMUY launched 1 May 2016; ISPRL's crude strategic reserve capacity is about 5.33 MMT across three sites.
- Target schedule to be reviewed every six months.