Consumption is expected to fall as more households take up piped natural gas and LPG subsidies are unwound, writes Rituparna Ghosh
India's LPG consumption may contract this year after reaching another record high in 2024 unless new demand centres for use as a clean cooking fuel emerge, budget documents show and industry officials say.
Urban use of LPG as a cooking fuel in India is likely to be further eroded this year by the development of piped natural gas grids while rural sales could be affected if the government decides to remove subsidies. Households account for over 90pc of India's LPG demand. India's overall LPG consumption rose to a record high of 31mn t in 2024, up by 7pc on the year, according to oil ministry data, on the back of an election year that prompted several LPG incentives from the ruling BJP party. The government's target of adding 7.5mn more low-income households under the Pradhan Mantri Ujjwala Yojana (PMUY) subsidy scheme a year ahead of schedule also supported the growth. A total of 329mn households use LPG as of 1 January, government data show.
India's LPG imports increased by 13pc to a new high of 21mn t in 2024 on growing consumption and flat production of about 12.8mn t.
LPG use in urban areas is expected to contract as piped natural gas (PNG) becomes increasingly available, with household connections rising by 16pc to nearly 14mn last year, according to the oil ministry. PNG for households is subsidised by the government. Delhi expects the rural sector to drive demand growth as more users switch from harmful solid biomass fuels to LPG for cooking. But households that have switched fuel often return to cheaper firewood — a government survey shows that less than half of India's rural households use LPG for cooking, with the annual cylinder refill rate stagnating at three/yr since 2022.
The government also plans to reduce LPG subsidies in its latest budget for 2025-26 beginning in April. Subsidies for low-income households will fall by 28pc to 91bn rupees ($1.04bn) in the next fiscal year from Rs127bn in 2024-25. India's overall LPG subsidy declines to Rs121bn from Rs147bn. The decline in subsidies will hurt LPG demand in price-sensitive areas — nearly 129mn people in India were living in extreme poverty in 2024, according to a World Bank report.
No poll pull
Elections are a major demand driver for LPG in India as federal and state governments often reduce rates or offer free refills during their campaigns. State-run refiners slashed 14.2kg cylinder prices by Rs100/cylinder in August last year to Rs803/cylinder ($9.20/cylinder) in Delhi, where they have remained since. LPG subsidies of Rs300/cylinder were also extended for low-income households, which is due to expire in March. Several state elections in late 2023 announced free cylinders, boosting demand for LPG throughout 2024.
But the government may now look to wind down subsidies with no critical elections to contest in the near future, as it did after the 2019 election. Increasing government repayments due to state-run refiners for lowering prices may also force it to raise cylinder prices again, analysts say. The government made no provision in its budget proposal to compensate the refiners for losses incurred in selling domestic LPG to households at below cost.
The losses accrued by refiners IOC, BPCL and HPCL from LPG sales during the April-December 2024 period are estimated to be around Rs285bn combined, according to their company reports. This would equate to Rs390bn for the entire fiscal year 2024-25. The oil ministry meanwhile forecasts India's LPG consumption to grow by 4.7pc on the year to 33mn t in 2025-26.
India kept 14kg LPG cylinders at Rs803 in Delhi for a 10th consecutive month for January but cut commercial 19kg cylinder rates after five straight months of hikes by Rs14.50 to Rs1,804, according to state-run refiner IOC.
